Discover signals that it’s time for a price increase and how to deliver the news to customers.

Business owners often hesitate to raise prices. Their reasons vary from fear of losing customers to overwork to undervaluing their offering. However, there comes a time when every business needs to increase prices. Let’s look at when and how to move forward when you’re afraid to charge more.

When to raise prices

Many price increases are simply a matter of remaining profitable. When your cost of goods and operations go up, raising prices is a must to keep your business viable. You need healthy cash flow into your business checking account to pay your expenses, employees and yourself.

If you and your team are overworked, this may be a signal that it’s time to raise prices. Yes, some customers might turn away in response, but these will be the ones who choose based on price alone. Customers who value your work will remain loyal. You might even use your higher earnings to invest in a new hire or technology that helps you work better.

Also, take a look at what competitors charge. If you’re the lowest priced option in your market, it could be time to start charging more.

How to raise prices

Buyers are part of the economy and they’re aware of current conditions. Many will simply accept a price raise. However, businesses should be transparent about the increase. Let customers know in advance about the new prices and when they go into effect. According to SCORE advisors, don’t overexplain and don’t apologize.

When raising prices, you may decide to reward loyalty by keeping existing customers at current prices for a set time. Be sure to communicate the price increase and how long they’ll receive favored pricing, as well as your appreciation of their loyalty.

You could also use a price increase as a way to introduce new tiers of your product or service such as a bare-bones option for budget shoppers along with a premium package that offers more value. For example, customers willing to pay more might receive one-to-one consulting or invitations to special events.

Plan to evaluate your costs and competitor prices at least every six months. When needed, don’t be afraid to raise prices.

 

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