Supply channel disruptions, shocking energy prices, and a tight labor market starting in 2020 formed a villainous trifecta. They caused mass inflation on everything from food to building costs. Did you raise your prices to keep up?
As a business owner, increasing prices on your customers can be challenging. You want to please your loyal patrons, but you too are faced with rising prices.
You need help finding a happy medium between sustaining your business and satisfying your customers with value and affordable prices. What's a business owner to do?
If you are a service-based business, price increases are even more involved.
It's more complicated than creating a new cost basis and changing the price tag when you're a service. You likely have existing customers expecting ongoing service at their chosen service levels. To determine a new, fair pricing structure, you'll have to analyze all customers and levels.
When you have varying service levels, you must adjust prices on each for all new customers, too. Do you change them for existing clients or consider them grandfathered in on the old pricing structure? You have contracts to consider–do you stick it out or renegotiate?
If the thought of adjusting your prices keeps you awake at night, consider the alternative. What will happen to your company if you don't keep it profitable? Your business might cease to exist if you don't adjust prices to keep up with inflation.
It's like the flight attendant on a plane telling you to put your oxygen mask on first before helping someone else with theirs. When it's high time to reanalyze your pricing structure, don't approach it with anything other than confidence, knowing that you're doing what you need to do to keep your business alive
The key takeaway we want you to know is this: You don’t ever have to make and implement critical business decisions like this alone. Your business accountantcan support you with decisions and implementation. We’re here to help you maximize your potential and minimize disruptions and losses. Lean on us any time.
Let’s dive into what you can do to carefully consider and adjust your prices.
Look at all your current contracts. Take stock of how much each client pays and at what service level.
Identify customers who can have their prices renegotiated now. Schedule later negotiations for all other customers as their individual contracts allow.
It’s time to dive into the numbers. Your accounting firm partner is your business strategy consulting service. Your accountant can help you research pricing options. They’ll help ensure that your changes are competitive and make financial sense.
Consider industry standards and what competitors have done with their prices. Work with your accountant to create the best strategy for your business according to your area and industry.
You likely have different price structures for your clients' various service levels. Segment clients by type–kind of client, service, and product.
Next, rank customers by how easy or difficult you project it will be to increase their prices.
Then, differentiate according to profitability. You might discover that some client or service types are much less profitable than others. It might be time to significantly increase the prices for those less profitable clients. Alternatively, you could improve your company's profit margins by only accepting the more profitable client or service types in the future.
Additionally, brainstorm new modes of revenue. You might be able to launch a training course or app. Your accounting services partner can help you find new streams of money-making possibilities.
Are your promotions and discounts straining you? You don't have to keep them.
Consider different options to add value to your customers or help offset your costs. For instance, consider offering cheaper shipping and better customer service to stay competitive. Or you could add a surcharge for small order quantities to offset fuel and labor costs.
You can also promote customer loyalty and retention with a loyalty program. Keeping an existing customer is cheaper than advertising to bring in a new one. You can pass the savings on to your loyal customers by offering perks, rewards, and a community engagement platform.
Support your employees and sales team by implementing new strategies. Communicate the reason for the price increases. Consider brainstorming with them and developing negotiation guidelines, approved concessions, and customer service scripts.
Establish key performance indicators to track and measure. Continue to monitor the success of your new pricing strategy. Adjust as necessary.
You never have to make and implement business decisions alone. Partner with business accounting professionals to help you with all the minor and major decisions you have to make daily to keep your business thriving.
There’s opportunity in every business challenge. Adjusting your prices to cover the rising costs of your business is no different. Reach out to your accounting firm to help you maximize your potential and minimize your risks and expenses. We’ll help you put your oxygen mask on first.