As a small business owner, there may be times in your career when you need to raise your prices.
Whether it’s because the cost of running your business has increased, you need to raise your profit margin or you’re raising revenue for expansion, you may need to make a decision that could upset your customer base, particularly your loyal regulars who have been with you since you started or key clients who you have a contract or subscription service with.
Right now, it may be the case that the cost of running your business is about to increase. In April, hundreds of thousands of businesses across the UK are set to see a hike in business rates – the first overhaul of the business tax in the last ten years.
However, there are ways you can soften the blow and raise prices without losing customers. Here are five helpful steps you can take:
No customer likes seeing the costs of their favourite goods and services rise, but what they won’t accept is if prices continue to rise and on a regular basis.
When you become aware that you have to raise prices, make a detailed plan highlighting exactly where in your business will see an increase in costs. You should try and factor in how much the cost of running your business will change within the next one to two years – this way you won’t have to raise your prices every few months.
Raise the issue in advance
Honesty is the best policy. If you’re raising your prices because of the hike in business rates, it’s likely that your local customers are already aware of the problem and will sympathise.
If you own a bricks-and-mortar business, create a notice that can sit in your shopfront that explains when and why you’ll be raising your prices. If your business has an online presence, write a quick blog post explaining the rise or explain the situation on social media. With this openness and transparency, your customers will appreciate being informed.
It’s best to try and raise the issue at least a month in advance, that way your customers have time to take in the news and potentially spend even more money on products that they know will be more expensive in a few weeks.
Offer new features
If you’re providing specific services to your customer and need to raise your prices, add a new feature to your services.
Customers may accept the price hike more easily if they know they are getting something extra in return. For example, you could offer free gift wrapping for items purchased as a gift – this way you are introducing a new, cost-effective service that could make your customers happy.
Research the competition
If you’re having to raise your prices, the chances are that your competitors are having to do exactly the same.
Regularly check out your competition – either online or in-store – and see whether there’s been any increase in prices for goods or services similar to yours. That way you could make your goods slightly cheaper than your rival, which would increase revenue while making you price competitive.
Bundles are better
To cushion the blow of a price hike for your customers, offer them new bundles of services which they may need.
For example, if you own a hair salon and you need to raise the price of a haircut, highlights and a blow-dry, increase the prices, but also offer all three as a bundle. This way each of the services is offered at a discount compared to its individual price, but you’ll be earning more money overall through the packaged deal.
Struggling to keep on top of your business’ finances? If you’re looking for help and advice on financial management, discover how sage can help.