Smarter Pricing Strategies: Raising Your Prices

I know. We’re still struggling with a depressed economy, high unemployment and increasing prices for necessities.

It doesn’t seem like a really good time to talk about how to raise the prices we charge our clients, many of whom are struggling just like we are.

That said, it’s a fact of life that in order to survive, small business owners must often raise, their prices.

How The Big Guys Raise Their Prices

Corporations simply raise the price and you notice it the next time you pull up to the gas station and it’s $3.46 per gallon instead of $3.36. Sometimes companies reduce the amount of product in the package while charging the same price — and hide it in a new eco-friendly package or as reduced calorie portions.

As a small business owner though, you’ve most likely built your reputation on a more personal level. Your clients expect more communication and consideration from you. But that doesn’t mean you’re locked into your current pricing.

One of my coaching client has been struggling with this issue for several months. She is feeling stuck in her business. She wants to earn more, but is leery of asking her clients for more money. She is afraid that they’re going to bail. She’s also insecure about the value her services are adding to her clients lives, but that’s another post…

As a small business owner myself, I’ve tried different ways of increasing prices, and I’d like to share with you and my client what I learned so you can grow your business through smarter pricing strategies.

Create a pricing strategy

That sounds like a no-brainer, right? For a seasoned business owner, or an MBA, this might be the case. But often small business owners, who may have started their business to earn money from a creative hobby or to share a much-needed product or service with the world, fear might get in the way.

If you’re like me, you started out with a rather vague concept of “I want to earn money doing something I love. What can I do to make this happen?” In my case, designing websites and providing hosting services was the answer. In the early days, I just came up with a relatively arbitrary number to give prospective clients. If they balked, I took that as a sign I should lower my prices. I was afraid that someone would tell me I wasn’t worth what I wanted to charge.

As I gained experience and began researching the competition, I started noticing trends in my niche of the industry. So I started making pricing guides for myself, based on a slightly higher price than my competitors for my design services, and a slightly lower price than competitors for my hosting services. Again, I was still afraid of what clients and prospects would say.

This seemed like a good idea at the time — and was much better than grasping at straws. But this strategy left me with no comfortable recourse for adjusting my prices, or any real way of knowing if I needed to, based on my own business. And there was still that fear.

But then I realized that setting your pricing doesn’t have to be emotional and you don’t have to be afraid. You simply have to behave like a professional. And professionals plan their pricing strategies ahead of time.

According to Freelance Switch:

A pricing strategy is basically a well-thought out plan for how you decide on the fees you charge for the range of products and services you offer. It’s not simply a ‘finger in the air’ guesstimate of how much you fancy charging from one month to the next but a coherent calculation based on a logical structure for your pricing.

Instead of panicking every few months when you’re stressed out over a lack of adequate income or your time being stretched thin, try this:

1. Evaluate your existing pricing structure: per hour, per project, etc.
2. Determine how much you need to raise your rates in order to cover your obvious and hidden costs.
3. Restructure any packages you offer to compensate for costs you didn’t factor in initially.
4. Notify your clients ahead of time.
5. Work on your perceived value.
6. Keep it positive.

Once you have your strategy in place, you can communicate ahead of time with your clients and make incremental pricing adjustments over time. While some clients may seek out cheaper alternatives, you’ll be able to replace them with higher paying clients who are looking for the quality you provide.

Tomorrow, we’ll talk about evaluating your existing pricing structure…