So many different factors can cause us to need to raise our prices: inflation, competition, a supplier's cost increasing, a new marketing strategy... Have you ever had to raise your prices? If so, why did you and what happened?
Raising prices can seem daunting, and you don't want to lose customers, but when businesses expand, all factors need to be taken into account, including prices. When I have raised prices in the past, most clients are very understanding and I make a point of not making a huge increase right away. Clients really appreciate getting a one or two months notice so that they have time to account for this change. Honesty and transparency make you so valuable.
I just did this last year when I sucked it up and converted all of my regular clients that I have had for 10-15 years to value billing. One price, includes the apps, qbo subscription (many I converted at that time too). Putting new clients on value pricing---piece of cake. But It is scary for the older ones, but I did it and raised the prices. Yes, some contacted me. But if they wanted "cheaper", I offered less services. That is the key!
You really should raise prices EVERY year. Just a bit. But when the economy tanked, I felt I could not do that to the clients. They were all struggling. But now that the economy is going well, it is the perfect time to do so.
This is a great question, and something I have been talking about with many small business owners. It seems like most small businesses (including ours) always start out undervaluing their services by starting the pricing plans to low. Then as their confidence in their own ablilites increases, and therefore their workload, they start to realize that they should be charging more. I must confess that just this year the true benfits of value pricing smacked me in the face when comparing two of clients and how dramatically different their willing to pay for services were. Our first price increase came after our conversion to QuckBooks Online, but everyone welcomed the increase after experiencing the improvements. Our second increase actually was achieved by reducing features that clients were not using but were eating up our time. Finally, we also time our increases around larger events such as increases in minimum wage so they are somewhat expected.
I find that the area that we seem to have to be the most sensitive to is payroll services. When done correctly, payroll can be a great profit center, and when done wrong, a business killer. Since there is so much price competition we find it is difficult to value price payroll unless we are able to completely bundle everything together (bookkeeping and payroll.)
Hoping to reduce the cost of time spent on payroll, we recently converted our clients from IOP4A to QBOP and told our clients that we were absorbing the additional expense from the upgrade through the end of the year, but there would be a minor price increase starting January 1. Ou goal is to eliminate the need to print payroll checks by offering green dot payroll cards to people who do not have a checking account. It is our goal that by offsetting the new benfits against the increased price, our clients will be ok with the rate hike, and that we will be able to streamline that part of the process too.
When in sales, we always said "Its hard to fall up a flight of stairs!"
Thank you so much for sharing your experiences! I think this is an uncomfortable topic for most small business owners, so hearing your process provides an excellent perspective and realistic approach. I love "It's hard to fall up a flight of stairs!"
I find raising your price is particularly hard when you're offering a service rather than a product. Frankly, it can be challenging to charge what you're worth, let alone hiking prices along the way! But if your #1 goal is provide great value, meet every deadline and be a trusted contributor or advisor for every project, most clients are willing to pay what you ask for. When I've raised my prices in the past, I've negotiated a different, slightly lower rate for long-term clients to make sure they know how much I appreciate their ongoing business and support. On the other hand, for new customers or clients, I think there's great value in confidently quoting your rate and sticking to it. :-)
This is a great question. I tried raising my prices before and I took a lot of backlash from my clients. A good bookkeeper is very under appreciated. Clients just do not know how valuable we are until tax time comes around. I found out when raising prices just communicate to the client why you are raising your price. Is there more work? This is why it is important to over charge a little than to under charge. You can always bring your price down, but it is a lot harder to bring your price up especially if you are bringing the price up dramatically.
@Markus Learning to charge more is certainly a lesson I have had to learn along the way. Thanks for the reminder! We folks, who work for ourselves, need to make sure we value ourselves.
Recently Hector Garcia recorded a great video that I feel goes perfectly with this topic, I hope that people do not mind me promoting his video. Hector does not know this but I attribute a lot of my success to the videos he creates which motivated me to find a better way.
This specific video is titled Road to Consultancy & Skills Rate Matrix, and talks about how to charge what you are worth.