Many new business owners are so anxious to make sales they set aside sound business management practices and sacrifice price for revenue. In some cases the need for cash flow is a driver, in others it may be thought that the a price concession will be a strategically wise decision. Whatever the reason for the concession,eventually you want to quickly get prices up or the consequences may be less than desirable.I was very pleased to hear recently that a client of mine successfully increased prices. They overcame the fear of losing the customer and proposed a plan to ramp up prices over a reasonable period of time and the proposal was accepted. If this sounds too good to be true, it may have been if they had not first planned their strategy objective and tactics for the increase.
First and foremost was the task of reviewing their operations processes and determining the true cost of delivering the products and services. As is the case with most micro businesses, the owner/operator is responsible for many of the process steps, What is important is to assign responsibility for each step from the business owner's point of view. The step may be an administrative function, research, contracted help or any number of job descriptions. Once the responsibility is assigned. cost out each step based on the going rate for each of those functions.
When it is all added up, a more accurate cost is determined. Applying the appropriate mark-up gets you to the new selling price.
When one is able back up the reasons for a price increase the easier it is to implement. Knowing your cost of operations is the first step.
The worst case is that you may lose the customer, but if it is not profitable, is it really a loss? The best case that the customer sees the value in dealing with with you, remains loyal and your business is profitable.
Don't fear the challenge of increasing prices when your costs go up, be energized and rise to it. Your business is depending on it to survive.
Good selling,
Richard
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