How To Increase Prices In Your Business

One of the most delicate decisions a business must navigate is increasing its pricing it charges customers and clients. Pricing directly impacts revenue, profit margins, customer perception, and market competitiveness.

In this article, we delve into the main areas to consider when deciding when and how to go about increasing your business goods and services pricing. As a business owner, if you have asked yourself when the last time my business put prices up, and that answer is more than 12 months ago, then it is likely that your business is due for a pricing increase.

Employers reporting through STP need to make a finalisation declaration by 14 July each year.

Why Should Businesses Review Pricing Regularly?

As inflation continues to be above the norm, it is highly likely that your business’ costs are increasing at unprecedented levels.

Businesses must continually evaluate their cost structures to ensure they continue to be successful and sustainable, which is underpinned by their ability to trade profitability. Where operational costs rise due to factors such as inflation, direct materials and input costs and increased labour costs, maintaining current pricing levels may erode profit margins over time.

It is essential to strike a balance between cost recovery and maintaining competitive pricing to avoid alienating customers.

Methods to Increase Pricing

There are lots of methods businesses can utilise to implement pricing increases. We have listed a few common methods below;

• Fixed Percentage Increase
  Pricing can be increased broadly for your goods and service offerings by a fixed % from the existing price. These % increases can either be to a group of offerings, some offerings or all offerings.
• Groups of Clients
  Pricing can be increased for a particular group of clients, as opposed to all clients, if your business generates income from different revenue streams, and the appropriateness of a pricing increase differs between such revenue streams
• Change Pricing of Quoted Items
  Where jobs are individually quoted, then job item unit pricing can be adjusted to reflect a higher cost of doing business
• Change the way you Quote
  Pricing can be adjusted via incorporating more variable and / or direct costs into your sales pricing, which may help recover more direct costs your business incurs on offerings
• Levies, Surcharges or Admin Fees
  Where additional costs have been passed onto your business from suppliers, passing these straight onto the client and splitting them out on invoices can seamlessly result in your business not having to bear these. Common ones include credit card surcharges, transport charges and fuel levies.
• Competitor Pricing
  Competitor pricing can be a good reference point for what these price increases could be, along with your own cost increases.

Communicating Pricing Increases

Once you have decided on a suitable structure to increase pricing, the next step is to communicate this.

Firstly, always communicate any pricing increases to your internal team to ensure they are on the same page when interacting with customers and clients.

Communicating scheduled pricing increases with customers is also important, especially where the customer list is not the general public and where your business has repeat customers.

Methods to communicate pricing increases include:

• Sending out an email update (EDM) to customer lists
• Updating pricing charts on your website and everywhere your pricing is available
• Send individual emails and make calls to your high value customers
• Inclusion of a general statement on customer invoices during the period prior to the price increase, which details the date of when the price increase is scheduled
  
  

Final Thoughts and Potential Customer Reactions

Reviewing your current pricing is imperative to ensure that your business continues to remain successful and profitable. It is recommended that pricing is revisited at least once a year, where business owners look at sales pricing, along with their costs to determine sustainability of what suitable pricing increases may be.

While general costs of living increase, customers have come to expect that all goods and services, whether personally consumed or consumed by their businesses will go up periodically. Therefore, being brave and increasing your pricing should help maintain margins.

Broadly, customers value your goods and services and are a customer of your business for a reason, so increasing pricing should not deter customers from continuing to buy from you, especially where strong relationships are maintained with customers over time.

If you would like our assistance with how best to implement a price increase for your business, please contact Link Advisors and we can assist you.