The 5 Benefits to Raising Prices

Fri, 29.10.2021, 00:00

Raising prices is a part of owning a business. Whether you like it or not, at some point you’ll need to do it; and more often than you think.

What’s important is:

• To know why you’re doing it

• Know when to do it

• By how much to change, and

• How to execute it successfully

Let me be clear, I’m not talking about raising prices just because you can or chasing profits at all costs. I am talking about building a sustainably profitable business. Price increases are a part of that no matter your industry.



As we approach the end of the year many businesses are trying to figure out what to do. Most know they should raise prices, but will they do it and can they do it successfully? Both are excellent questions. In this article we’ll focus on the why.

Let’s take a look at the top 5 benefits to raising your prices.

You Make More Money

That’s right, raising your prices is the fastest and easiest way to boost your profits. In fact you can actually lose a few clients and still make more money when you do it right. If you have a product with 40% gross margin and you increase the price by 10% you can lose 20% volume and still break even. Mind blowing, right? The answer is YES!

The objective when raising prices isn't to keep every single customer. It is to keep the most important ones and possibly get rid of some that are costing you time and money. When you can achieve that you'll be more profitable.

Of course the key here is knowing how to do it the right way so you can achieve the benefit. Most businesses are able to increase by at least 5% (on average) without a strong reaction from customers. Exceptions to this are if you're positioned as a low price leader or selling commodities. Otherwise a nominal price increase, when well-communicated, will be acceptable to the customers who value your offer.

Yes, I said well-communicated. How you communicate price changes has a HUMONGOUS impact on the results. It can be the difference between success and an angry band of customers banging on your door.

You Attract Better Customers

When you value your offer and price it in a way that’s fair to both you and the client, you attract better customers. When a business doesn't believe in their offer and under prices it customers sense that. It's often why they won't buy.

When the price is set right, it will attract the right customer who in turn will be more engaged in the process. Just think of all the things we get handed for free, most of it gets discarded. Or the things that we buy for a “cheap price” we tend to not treat it with the same care as something that is expensive.

The same applies to your products and services. Price them right and you’ll find yourself attracting higher quality customers.

You’ll Enjoy the Work More

It might sound funny but the truth is when you’re paid a “fair” amount for your goods or services you’ll enjoy the work more. You can kiss resentment goodbye. No one feels good about being paid poorly.

But it’s more than just the money. In fact, you know that you’re working with clients / customers who truly value what you offer. It feels good, no wait it feels GREAT! It puts a spring in your step and makes what you're doing or producing feel more worthwhile. Making your work that much more enjoyable.

You Can Invest More

When you have higher profits in your business you can afford to invest more in your business. It might sound obvious. Often I think that people forget. Profit isn’t just about taking more money home. It’s about:

• Being there to serve your customers in the long term.

• Bringing great new innovations to your customers.

• Getting new knowledge or certifications for you / employees.

• Building that great new program for your clients.

• Add those fabulous new features to your software.

• I’m talking about building your legacy and having that impact on the world you dream of. All those things take investment. When you earn more you can also afford to spend more on the future of your business.

You Can Enjoy Life Outside of Your Business More

And yes, of course when your business is profitable you’ll also have more:

• More money for life outside of business.

• More time to spend with family and friends.

• More capacity and energy for doing things outside the “office”

I love what I do, but I’ve learned the hard way work is not everything. For an entrepreneur or business owner a profitable business is also an enabler to living a joyful life.
 
Which of these reasons excites you the most? I’d love to know you’ll find me the Pricing Lady on most social media platforms or at www.thepricinglady.com.
 
 
 By Janene Liston | The Pricing Lady