Knowing exactly how much to charge for your services is as much an art as a science. Staying competitive is impossible if you don’t raise your prices, but knowing when to do so is tricky. We caught up with professionals in all different industries to understand when they decided to raise their prices and why. Based on their feedback, here are six signs that it’s time to think about charging more.
1. Your competitors charge more than you.
Having the lowest prices in town can help when you’re trying to get a business off of the ground. But once you’ve established yourself, it’s time to raise your rates. Find out what other people in your industry are charging, and make sure you’re in range, but still competitive. Remember that having the lowest prices isn’t always the best business move, and tends to attract people who are making a decision based solely on price.
2. You’re so busy, you’re turning down work.
If your workload is at capacity, you’re doing something right. You probably have a great reputation and lots of referrals — good on you. But if you find yourself in the position of having to tell clients you don’t have the bandwidth to take on any more work, it’s time to raise your prices. Clearly your work is valued, and your rates should take supply and demand into consideration. You might even use that extra income on things like payroll or marketing that may not be the best use of your time and frees you up to accept more business.
3. The cost of doing business has increased.
If your operating costs have gone up because of things like inflation, rising labor costs or steeper prices on equipment and repairs but your profits have not, it might be time to raise your prices. Make sure you have a comprehensive bookkeeping system that includes your revenues, costs, and profit so you know exactly how much you’re making and spending. Then track those costs over time to see how much you’ll need to raise your prices to keep making money.
4. You haven’t raised your rates in quite a while (or ever).
When you first started your business, there’s a good chance you didn’t initially charge what you were worth as a way to attract customers and get your foot in the door. But if a significant amount of time has passed and you still haven’t increased your rates, it’s time to give yourself a raise.
5. You’ve gotten better and learned new things.
It’s common to price low when you’re getting started, in large part because you’re still developing your skill set. As you invest more in training and developing new competencies, you deserve to make more money. If you’ve gained new skills or improved on old ones, it should be easy to justify an increase in prices.
6. Your customers are high maintenance.
It’s an odd psychology. But how much you charge says a lot about how much you value your work. If a customer feels like they’re getting too much of a steal (or worry they’re doing something “on the cheap”) there is a good chance they’ll want to micromanage your work. If you charge more — and prove your worth it — how your customers treat you will follow suit.
How do you know your price is right? Tell us in Trending topics and share your comments below.