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If you’ve been in business for a certain amount of time, then you know there will come a time that you need to raise your prices. But when is it the right time to do that? This is a topic that comes up all the time. So let’s walk through the process that I take my clients through when this topic comes up.
Revenue vs. Profit
There are definitely a lot of factors that you need to look at when it comes to raising your prices. Especially if you’re a product based business, or even a service based business.
The first thing you want to do is make sure that you’re actually making money. There’s a difference between revenue and profit. Just because you bring in $3,000 on a service, doesn’t mean you’re making a $3,000 profit. If you’re spending 85 hours to do it and you factor in things like the outsourcing you have to do to complete that project, there’s a good chance that the $3,000 could actually only be netting you less than $500.
Spend some time looking at your numbers so that you have FACTUAL data you can evaluate before just slapping a new price on something. You want to be sure that you are truly putting yourself in a place of PROFIT, not just revenue.
When is the right time to raise your price?
The reality is that you’ve got to FEEL ready for it. Raising your prices, whether or not you’re looking to grow your business or increase your revenue, doesn’t necessarily mean you’re going to sell it. You’ve got to feel good about it, and you’ve got to feel confident in it.
I had a client who we’ve raised her price on a service that she provides multiple times.
First it was in what we were calling “beta pricing” aka much lower than it should be to test the market.
Then once she got it through beta and we got a little bit more clear on it, she raised the price.
Then once she had several clients under her belt with this service, she quickly realized that she needed to increase the number of hours she was spending on it – therefore, we raised the price again to compensate for the additional time spent (keeping her in a zone of profit).
She has maintained that pricing for several months now. She feels really comfortable with it. She sells it with ease. She is fully booked.
Then….somebody got in her ear and told her that she really should be charging more.
So we had this long conversation and I told her if she felt good about it to raise the price. She said she felt good with it – so she said she was going to make the increase.
After 4 discovery calls and landing 4 more clients, she told me she sold all of them at the non increased pricing. Why?
Here is what she said: “I just didn’t feel comfortable with it. I feel very comfortable with the price point I’m at right now. I feel very comfortable talking about it and sharing it. So I want to stick with that right now. I know that we talked about raising it, but I don’t feel comfortable with it.”
That in itself is by far the most important thing you need to think about when it comes to raising your prices. There’s bound to be a coach, consultant, friends, family, etc telling you to raise your price.
But if you don’t feel comfortable with it, you will not sell it. Period. End of story.
If you don’t feel comfortable with it, you’re going to hesitate when someone asks you about the price. The tone in your voice is going to change. You’re going to constantly be underselling yourself. Raising your price can take you from being so damn confident in yourself to complete feelings of impostor syndrome and lack of value. And your prospects will sense that a mile away.
Increasing your price is far more about the mindset associated that actually slapping a new price tag on it. Changing a number is the easy part. It’s the mindset work that coincides with it that is the real work!
The biggest factors when it comes to raising your price.
1. Are you comfortable with this? The biggest factor I really want you to take into consideration is if you feel comfortable with it. Is this slightly outside your comfort zone? Or REALLY out of your comfort zone?
2. Small Increases are OK! You can raise your prices in smaller increments. You don’t need to jump from $997 to $5000. You could go from $997 to $1197. The gradual increases make it much easier especially if confidence is a factor.
3. Will your market support this and if not, that’s OK to! Sometimes raising your price is going to take you out of certain people’s budgets. It does not mean that your prices are too high. This just means that maybe you can’t serve that audience anymore in that capacity – and that is ok (if YOU are ok with that). Do you want to still serve this audience that can possibly only afford you at this level, or do you want to move beyond their audience a bit and you want to serve at the next level.? That’s a very personal decision.
Last note to consider:
Raising your price is not the only way to scale your business and is does NOT guarantee you more revenue. You still have to sell it! Take a look at all of the data you have in front of you. Decide what is your are trying to accomplish with the increase price and make an educated decision. Take this perspective into consideration – would you rather sell one package at $1997 or 5 packages at $1497 because you’re more comfortable with the $1497 price point?
1 x $1997 = $1997, 5 x $1497 = $7,485. You get the point 🙂
If you need help figuring out what that next step is, send me an email at firstname.lastname@example.org and I am happy to help you work through this. This is a huge area of focus in my 1:1 GPS to Success Program and I am happy to help guide you, help you to analyze and evaluate ALL the moving pieces so you can make a decision you feel comfortable and confident AF in to GROW your biz!!
Connect with Michelle-
Website – https://michelledenioconsulting.com
Facebook Profile – https://www.facebook.com/MichelleDeNioBizStrategist/
Linkedin Profile – https://www.linkedin.com/in/michelledenio/