In today’s world, everything is going up. Fuel, electricity and especially food have gone through the roof. Wages, of course have increased, as has the level of super to be paid to employees. If you’re a tenant, your rent has gone up astronomically. If you’re a landlord, the cost of owning a property has hugely increased. Land values increase every year, which might seem nice, but on top of higher mortgages, also are increases of council rates. Plus, if you own 2 properties (or more), chances are you’re paying land tax. I know one business owner in this realm, who in 12 months and without buying any further properties, had a land tax increase of a whopping 530%. Seems absolutely ridiculous, but with the increase in values and no change in Qld land tax thresholds since 2007, property owners are suffering – which in turn means, tenants are suffering!
So, what does this all mean. Well, as business owners, you need to keep abreast of your costs and what you’re charging – and often yes, reviewing if you need to have a price increase. If you do, then you need to action that.
As a business coach, years ago, I would say to clients to review their prices at least once a year. Sadly, some businesses never review their prices, until they come to a point of crisis, and then have to levy a large increase just to stay afloat. The repercussion of this is that clients and customers don’t remember that you didn’t have a rate increase for say 4 or 5 years, only that you’ve increased your charges by a whopping 20-30% or so. People will choke on this large increase and will, at the very least, be motivated to compare prices and shop around, or leave, just on principle.
Now, in today’s entrepreneurial world, when talking to my business coaching clients, I recommend they review their prices at least 2 or 3 times a year, especially if they’re buying product, because that is increasing almost with every new order. The exception, of course, is if they’ve negotiated a price, which the supplier will honour for 12 months.
However, I think some clients feel that asking for an increase is akin to talking dirty. I believe this comes about because:
- They have difficulty valuing their products and services, so naturally don’t feel comfortable asking for more dollars.
- They are downright uncomfortable talking about money.
- They feel that everything else has increased; they can’t too. Whilst this is ‘kind’ to everyone else, you’re not being kind to yourself, your family, your business or your staff. If you go under, your staff will lose their jobs!
- They think there is enough margin that they can afford to allow some rate erosion. Problem is that unless you’re running your numbers regularly, you might not realise just how large the erosion actually is.
- This ‘dirty talk’ will lose clients. Let me explain why this is not usually the case.
When you have a reasonable rate increase (like 5-10%) you won’t lose any clients unless they were actually thinking about leaving because they don’t see value in the service, or are not looked after, don’t like the service or in some other way, it’s just not something they want to pay for. Yes, in this case, that increase might be enough to ‘push’ that person to action – if they have time to source another option. However, if you’re looking after your customers and clients, then an increase of a few percent isn’t going to lose you clients. Be sure to provide great customer service and they will keep coming back. If you lose one or two, then the increase overall will very likely cover them and more, but remember you have less clients. Plus, if they are that easy to go (and presuming you’re doing a good job and look after them), then perhaps they are not A or B grade clients, and more likely a D grade client. If you’ve read my blog about grading clients then you know that losing (or ditching) D grade clients makes room for more A and B level clients. The As and Bs are those which value you most, rave about your services and refer you to others. They are your advocates – you look after them and they return time and time again (bringing along friends and associates).
As I mentioned above, ensuring your business is successful doesn’t just impact you. It impacts those around you, including your family, your staff, your customers, your suppliers and even the services which you access. When a business goes down, then it might be that their marketing agent is terminated, or their contract bookkeeper, and naturally their suppliers will lose business too. Success (and failure) has a ripple effect across multiple businesses – so you actually have a duty and responsibility to ensure you’re charging the right amount, regularly increasing your fees (at a fair level) and ensuring your business will be around tomorrow. Asking for a rate increase is absolutely not dirty words or something to avoid, or worse, something to be ashamed of.
The question you have to ask yourself, if you’ve not had an increase lately, is why? When I say ‘lately’ I mean in the last 6 months, or at the most, the last 12 months.
This is where a business coach, like myself, can come in really handy, I will:
- Help you with the figures to work out exactly what your costs are and how you’re faring.
- Help you get past any negative mindset around money and charging and rate increases.
- Give you strategy of when and how to implement an increase. As with anything in life, there is a right and wrong way and a right and wrong time.
- Assist with providing the right wording to make the increase most effective as well as how to address any objections, questions or potential negative responses.
- Help you with a myriad of other aspects of your business.
This isn’t the only thing you can do to improve your business. I talk often about the 1 percenters. There are often 100 different things I help my clients with to improve their business. It’s often far more than just one or two things; it’s often dozens, or a hundred different things which can be improved. Some changes are minor and might not make a huge change in their own right, but add each of them up and soon you’ll be seeing substantial differences and sustainable improvements.
Whether you’re wanting help with business growth, business improvement, solving a problem or getting the money and marketing sides of your business right, I can help. With 30+ years of experience, plus a range of formal qualifications, I have the expertise in business to help you solve problems, expand, improve and grow. Give me a call today on 0411 622 666 or fill out a CONTACT CARD to discover improvements in your business.
