Increasing your prices is easier said than done.
Often you know you should be charging more, but the fear of losing work stops you from doing it.
However, for a business to be successful, you need to be able to increase your prices.
Before we look at when / how to increase your prices, I think it’s important to remind ourselves some of the reasons WHY you should do it.
The first reason to increase your prices is to protect you and your business from rising costs.
Every year you and your business will be hit with price increases. To combat this, you need to increase your prices accordingly. Here are just a few things you can expect to rise every year:
- Materials – Paint and sundries
- Staff wages
- Your wages (living costs increase, so your wages should increase too)
- Marketing costs
The next reason to increase your pricing is to reflect the growth and improvement of your business.
Think about the service you offer now compared to 5-10 years ago. I’m sure you are a more skilled decorator now.
It’s only fair that because you’ve improved the speed and quality of your work, you should be earning more.
Afterall, the customer is getting an improved service, right?
Another benefit of increasing your pricing is that it can improve your clientele.
Customers who are willing to pay more for decorating work, will typically value your skills more and will be more pleasant to work for.
Building up a bank of better and better customers will mean a much happier working life for you.
Finally, you should always be looking to increase profits so that you can reinvest in the business.
With extra profits means the ability to spend money on better quality equipment and improving your skills with training courses.
Now…all this is great, but it doesn’t make it any less scary to put your prices up.
So, how do you know when you can increase your prices?
…without endangering your business as a whole.
Well, if you’re looking for a clear-cut sign, then conventional wisdom says:
If nobody is showing resistance to your pricing, it’s a very good sign you should be charging more.
As a self-employed painter and decorator, this means if you’re winning virtually every job you quote for, it’s time to increase your prices.
But what happens if you start losing customers because you put your prices up?
Well, you need to remember that once you start charging more…you don’t need as many customers to keep earning the same amount of money.
So, it is often well worth the risk to try it.
Let’s look at the numbers:
Imagine you quote for 10 jobs. All of which are 5-day jobs.
Let’s say you charge £120 per day and you get all 10 jobs.
10 jobs x 5 days x £120 = £6,000
So, what happens if you try to increase your prices to £140 per day?
Well, the comforting part is you now don’t need to get every job.
In fact, by charging £140 per day, you only need to get 9 jobs to earn as much money.
9 jobs x 5 days x £140 = £6,300
Charge £160 per day and you only need to get 8 out of 10 jobs.
8 jobs x 5 days x £160 = £6,400
Charge £180 and you only need 7 out of 10 jobs
7 jobs x 5 days x £180 = £6,300
Charge £200 and you only need 6 out of 10 jobs
6 jobs x 5 days x £200 = £6,000
You can see the pattern.
So, if you’re currently getting every job you quote for then why don’t you try it?
As you can see, you can afford to lose the occasional job if you’re charging more per day.
Plus, if you struggle to fill your diary at the higher day rate, then you still have a few options:
- Try and fill the rest of your diary by quoting some jobs at a lower day rate. (Example: If you get 8 jobs at a higher rate and 2 jobs at a lower rate then you’re still much better off)
- Work fewer jobs and enjoy the extra free time.
- Park the idea and go back to your old prices for a while
Credit: This article was inspired by a discussion on the 2decs1mic podcast.
Check out the episode for free here: https://www.podbean.com/ew/pb-7f52h-102f205
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