If you increased your prices by 5% how many of your customers do you think you’d lose?
None? One? Two? Half a dozen?
Not all of them I’m sure.
Next question, do you think you could replace these few customers with new ones who would pay 5% more?
I’ll assume the answer is yes.
So, what happens if you increase your prices by 5% every year? And every year you lose and then replace a few customers.
What effect will this slow and steady approach have on your business?
Here are the numbers…and they might surprise you
Remember, this is just a 5% price increase per year….
Year 1 – £20 per hour = £41,600
Year 2 – £21 per hour = £43,680
Year 3 – £22.05 per hour = £45,864
Year 4 – £23.15 per hour = £48,157
Year 5 – £24.31 per hour = £50,565
Year 6 – £25.52 per hour = £53,093
Year 7 – £26.80 per hour = £55,747
Year 8 – £28.14 per hour = £58,535
Year 9 – £29.55 per hour = £61,642
Year 10 – £31.02 per hour = £64,535
Year 15 – £39.60 per hour = £82,365 (Basically double where you started)
Year 20 – £50.54 per hour = £105,120
Year 25 – £64.50 per hour = £134,163
Think of it like this. Can you offer 5% more value to your customers every year? If you can, then you deserve to be paid 5% more.
Now, before you say these numbers are ludicrous. Think about it.
Are they really? In 25 years the going rate for a decorator could easily be £60+ per hour.
In 25 years, you might need to earn £134,163 a year.
To prove this…you only need to look at house prices:
Average house price in England 2020 = £256,000
Average house price in England 1995 (25 years ago) = £55,000