If you’re like many business owners, you might have found yourself wondering if raising your prices would help to boost your business revenue. While there’s no magic formula for calculating the right price for your products and services, here are three steps to follow if you think it could be time to review your pricing.
Step #1: Look at your spending
If the cost of your materials, equipment or rent has risen since you first set your prices, it could be time to look at what you’re charging. A successful business relies on a healthy profit margin - which means striking the right balance between how much you’re spending and how much you’re bringing in.
Take a close look at your statements to work out how much — and where — you’re spending in your business. You might find there are services you no longer need, products that are no longer profitable or better deals you could negotiate for ongoing costs with your suppliers. If you can’t do much about your outgoing costs, it could be time to explore new ways to boost your business income.
Step #2: Examine your business history
If you currently charge an hourly rate but have been using the same rate for years, it could be time to rethink your approach. The more experience you gain in your business, the faster you are likely to have become - which means you could be charging less than your services are worth.
If your prices have been set at a certain level for a while but your products and services have become even more valuable to your customers, it could be the time to let your customers know that a price increase is coming, and why, effective from a certain date. By giving your customers some notice, you can remind them of the benefits of your products and services, maintain strong relationships with them and allow them to plan ahead.
Tip: use our hourly rate calculator to set your new rate
Step #3: Look at other options to increase your revenue
Depending on your business, a price increase could be well overdue and the best solution for you. Other times, it might be worth exploring other ways of bringing in business. For example, if you’ve found your business has been quieter than usual, rather than raising your prices, it could be time to work on your marketing strategy to attract new business or encourage old customers to return.
If you find yourself doing the same kind of work for each client, you could consider creating packages for clients to choose from. For example, if you run a dog walking business, you might offer different packages based on how many dogs and whether your customers want to book weekly walks, daily walks or three walks per week.
Remember, any time you make changes to your pricing you will also need to update any price lists, advertising, marketing materials, online content and terms and conditions which refer to your pricing.
If you would like to explore some new ideas for your small business, get in touch with our small business advisory service or access our range of free financial management tools.
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