Written by Catherine O’Donnell, Outgrow Your Garage Education Research Intern
Pricing is essential to your business. Many business owners spend a long time considering what prices they want to charge for their work. It is also common in small business owners that they are reluctant to raise prices. Sometimes, you need to. Here are 6 examples of good times to raise prices.
When your costs increase
When your costs go up (and are predicted to stay up), it is a good idea to raise your prices. You may want to consider repricing each item or service based on the individual price increase, or across all items or services by applying a percentage increase to adjust for your overall cost increase. If you sell services, a percentage based on overall costs (i.e. gas and supplies) may be a good idea.
For example, when I worked at a bike shop, our costs dramatically increased due to supply chain issues caused by the COVID-19 lockdown. Item price and freight from our suppliers increased, but their publicly published MSRPs did not. We increased our bike labor services by 25% to keep up with this price jump.
When you gain experience
If you sell a service, or cater your products specifically to a client, your product may become more valuable with personal experience. Your prices should account for that. For example, if you are a photographer, or a video editor, your product may be worth more because of your experience. As you gain experience in these fields (as with many trades), your product becomes better as you learn more skills. In this example, a photographer may have perfected their editing style, which ensures each client is getting the same quality work and therefore increases its value.
When your general value increases
Has your value increased for some other reason? For example, if you’re a business coach, and recently finished your business degree or received a new certification, that can add value to your services. Your prices should reflect that. Price changes in this case may involve some explaining to clients. Different certifications are going to add different value to your product. Clients also may not understand the value of a certain certification, so how you present the new pricing is important.
When the market price increases
If the general market price for your item or service increased, you may want to match your prices to match. Even if you do not otherwise need to raise your prices, people are often willing to pay the market price. If you’re still on the low end of the market price, you could offer a “price match guarantee” tailored to your market to give customers confidence in their purchasing decision.
When your business value increases
Sometimes, changes in your business will increase your value, even when specific services have not changed. For example, if you used to provide a lawn mowing service, but now provide other landscaping services such as bush trimming, mulching, or pine needles, it may be appropriate to increase the price of your lawn mowing service. The lawn mowing service itself has not changed, but your business has. You’re probably acquiring new clients, paying off up-front costs for new materials, and marketing new services to your clients. These factors may warrant a price increase in your lawn mowing service.
When you’re overbooking
If you are regularly overbooking or selling out of an item or service, you may want to increase your prices. Increasing your prices in this situation may also alleviate a persistent overbooking problem. Increased prices may shift your target customers to those with a larger budget and allow your to be more selective in which clients you want to work with. If you’re consistently selling out of an item, you could try adding a similar item to your listings to see if that interests your customers.
These factors are a good place to start when considering raising your prices, but they are not the only reasons a business might raise their prices. The details of your specific business will determine when is the right time for you. Keep an eye out for these factors to ensure you are charging your worth! Want more? Check out the Outgrow Your Garage “Pricing Your Services” course for an in depth review of setting pricing that works for you and your business.
Catherine O’Donnell is the Education Research Intern at Outgrow Your Garage. She is 18 and graduating high school in June. She is currently working on AdvancEducation, a project to develop and provide advanced science coursework for rural, under-funded high schools with few or no advanced classes.