After hearing in recent days, about the Banks plans to increase their interest rates, on Mortgages etc, which indicated that they would rise in the next few weeks, it got me thinking about is there a right time to increase prices.
Aside from the fact they are already making a huge profit each year, I thought it was going to be difficult for their customers to come up with the extra money each month, without being allowed the time to budget and change their spending on other matters to ensure they have sufficient for their mortgages without losing too much else in life.
Whilst increasing your prices, won’t affect your clients who might use your services/ buy your products for a one-off, however, if they are regular clients using your services monthly or on any regular basis, then warning them of price increases can be useful.
Personally I recommend all my clients to have good, well-written terms and conditions in place for their clients, and part of those terms and conditions, include when prices will increase, for me it is July 1 each year, you may decide to do it at the new Financial year or some might decide to do it at the new Calander year- the important aspect is it is in writing and clients know when they can expect the increase to occur.
It allows all your clients to know about the increase and also budget for such increases each year, it also saves you stressing about how or when you are going to advise your clients of an increase etc. There is nothing worse than leaving it to late to advise your clients of a price increase, that you have to wait another month to actually implement the increase, as you have not given them sufficient notice.
Whilst, I understand this may cause your business cash flow issues, if your supplier increases their prices or any of your costs increase during the year, however, this is why it is important to ensure you understand the costs associated with providing your service or product to clients and can ensure your profit is sufficient to ensure you make money, however, to ensure you can cover these shortfalls for a couple of months. However, if everyone is increasing their prices on the 1st of July each year at the beginning of the new Financial year, your shortfall might include for a short time only and not over an extended period of time, which helps everyone’s cash flow.
Before increasing your prices, ensure you have reviewed and re-evaluated your business, ensure you understand all your costs associated with the business, including rent, electricity, water, gas, phone/internet, insurances, cost of making a product etc, as it is only by knowing your actual costs, then you can set the appropriate price for supplying your service or product.
The important thing to remember when increasing your prices is to communicate the change with your clients in an appropriate way, and with sufficient time which allows them to budget for their own business to ensure they can find a way to pay the extra for your services/product. If you don’t allow them sufficient time to budget, they may decide that they can not afford your increased prices now, and cancel the service or buying from you, and you end up losing a client, and we all know how difficult it is to find new clients, or how time-consuming it is.