Pricing is a touchy subject, isn’t it? Mention pricing and people get nervous, whether they’re clients looking for the best deal, or businesses looking for the best profit. And as a business owner, it can be hard to raise your prices. You worry about all sorts of things. Like, if it’s the right time, if you’ll lose existing clients or have trouble finding new ones… But there are some pretty clear signals that let you know it’s time to raise your prices. Let’s take a look at them.
1. You can’t remember when last you raised them
A recent review of my business made me realise it had been at least 2 years since I last looked at my prices. It might even be 3 years. Yikes!
It’s important to review your prices and profitability regularly – every 6 months seems ideal, but annually at the very least. After all, every other business seems to update their prices at least once a year.
And if your expenses have risen while your prices have stayed the same, you’ve effectively been giving yourself a pay cut. Oh no 🙁
If you can’t remember when last you raised your prices, get it done now!
2. You’re completely booked out
Being booked out is awesome. It’s lovely looking at your calendar and knowing that for the next 3 or 6 months you’re sorted. You’ve got a queue of projects to work on and you know that there’s a steady stream of cash coming in.
But that might also make you feel a bit frazzled. You’re completely full and yet the enquiries are still coming in. So you either have to book projects even further in advance, assuming people are happy to wait that long. Or you have to turn people away.
You might feel like you’re too busy to work on your own business right now, so things like price reviews will have to wait. But actually now’s the perfect time to raise your prices.
You clearly have an awesome service on offer and you’re in demand. If people are willing to wait months just to start working with you, chances are a percentage of them will be willing to pay higher rates to work with you.
Some people won’t be able to afford your new higher prices. But that’s a good thing. When you charge more, you can work with fewer clients at one time. That gives you more breathing room; extra time to work on your own business and more time to lavish attention on your clients.
You might be able to shorten your waiting times too. So instead of losing that dream client because they couldn’t wait 6 months for a space in your schedule; you could offer them a space sooner and win the project.
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3. You’re pretty sure you’ve been undercharging
If you have a sneaking suspicion that you’ve been undercharging, that usually means you are. That’s a sure sign it’s time to raise your prices.
Do you have had a tendency to underestimate how much work a project will need? Like you price something based on a best-case scenario. But then the project hits a snag you didn’t anticipate and takes longer than you bargained on. ‘Cos not every project will run to the best-case scenario timeline and scope. Things can and do change and you need to factor that into your pricing.
Maybe a client is a-scope-creeping, asking for more work than you originally agreed on. If you’ve just thrown in those extras rather than ask the client for more money to cover the extra work, your project just went from on-budget to making a loss.
If any of those feel familiar, it’s likely you’ve been undercharging and doing far more work than you’ve been paid for.
Review every one of your projects from the last 6 months. When you compare how much work you did to how much you charged, you can get a rough idea of how much profit or loss each one made. Make a note of the reason why each one had the result it did. You should soon see patterns emerging, like:
- Was more complicated than I thought it would be
- Gave the client extra work and didn’t charge for it
Seeing how much each of your ‘loss’ projects cost you should also give you a starting point for where your prices need to be.
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4. Your services seem too good to be true
Confidence, or lack thereof, can be an ongoing issue as a business owner. Asking for the sale, asking for more money, even just putting yourself and your business out there for scrutiny and attention sometimes feels like too big of a challenge.
Pricing is very likely to make you nervous:
“Are my prices too big? Will people laugh at me? Oh my god I’m a horrible person for asking for so much money; no one will hire me, I’ll go out of business and need to get a job in Asda…”
And that means you’ll keep your prices low. If each quote you send out gets an enthusiastic and hasty ‘yes’, it’s likely that’s the situation you’re in.
Think about the last time you made a big investment. Did you pause and consider if the value it offered was justified the price and if you could really afford it?
That’s the kind of reaction you want from your clients too. You don’t want to come across as so cheap that you’re straying into the ‘too good to be true’ category. Because when things appear too good to be true, they often turn out to be so, and that’s not how you want people to think of your business is it?
When things have a higher price tag, they have a higher perceived value. Of course, you need to deliver that value too. But you already are, aren’t you? So start charging for it and that’s the sweet spot where you get the best clients. Because they invested a decent amount of money into the project they’re invested in making it successful. So you get a client who’s more engaged in the process because they don’t want to waste their investment.
5. Your services have changed
Over time the work you do and services you offer will change. Sometimes that’ll be a subtle change, like an evolution, where along the way you’ve made some improvements. Or it could be a radical overhaul. You could even stop providing some services and introduce new ones.
That’s another cue for a review of your prices. Your current services and packages could require a different amount of work, or provide a different value than your old ones, so they shouldn’t be based on the same prices. So forget about the way you used to work and what you used to offer; review what you’re offering now and make sure it’s priced fairly.
6. You’re always improving
With each project you complete you become better at your job. So if your prices may reflect the skills and experience you had 1 or 2 years ago, but they don’t reflect what you have now.
Each project and each client gives you an opportunity to improve your business as a whole. To be a better business and give your clients a better experience.
If you’ve seized that opportunity to tweak your processes, service and offerings as you go, then you’re giving a better service than you’re charging for. Your services or packages might be a better offer than when you last set your prices. Your customer service may have gone up a level.
While it’s nice to over-deliver and delight your customers, those improvements you’ve made should be reflected in your pricing too.
Think too about the time and money you’ve invested on professional development. Those books you’ve read, the courses you’ve taken. Your clients will reap the rewards of that too, as you use your new skills and knowledge to get better results for them. So that should affect your rates.
A challenge for you
When last did you raise your prices? Or at least review them?
If it’s been more than 6 months, why not set aside an afternoon to take a look at them. Shut down email, social media and turn off your phone and start crunching numbers.
Look at things like:
- Your recent projects. Does the fee cover the value you’re giving and the work you’re putting in?
- Your expenses. Are you earning enough to cover all your expenses with some left over for things like profit, savings and emergencies?
- Do you have more clients coming to you than you can currently cope with? That’s a sure sign that you’re not charging enough.
Don’t be like me and leave it 2 years until you next raise your prices!
I’d love to hear what the numbers tell you; leave a comment and let everyone know if your prices are on point already or if you’re due an increase.
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