When should I increase my prices? (Service business)
If you’ve been running your service-based business for some time and see other business owners who have raised their prices, or seen coaches and trainers talk about raising prices, then you might be wondering if, and when, you should raise yours.
In this blog, I’m going to share some key indicators that it’s time for you to raise your prices.
Of course, you don’t need to wait for mine or anyone else’s permission to raise your prices, but it’s nice to validate your own thoughts around your pricing to help you make these business decisions.
7 signs it’s time to raise your prices
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When you feel resentful about your prices
As much as you love what you do, it doesn’t shield you from feeling a bit resentful sometimes. You can lose the enjoyment in your business when you’re not earning enough to pay your expenses and earn a decent living.
Some common situations where I see solopreneurs lose enjoyment or become resentful are:
- When they’ve been working with a client for so long, without a price rise, that the money they earn doesn’t truly reflect the value of the service.
- When they price their services too low at the beginning for fear of turning clients away, and
- When their client doesn’t appreciate the value
If this is the case for you, then it’s a strong indicator that it’s time for you to raise your prices.
You haven’t raised your prices in over 12 months
Price rises are a regular practise when running a business and there’s a few reasons for this. Not only are your expenses increasing, but so are your skills and efficiency.
The longer you offer your services, the more adept you become. The more skilled you become, the better the results you get for your clients. Just as an employee’s pay rate increases with experience, so should your prices.
Another reason for this is that you want your clients to become accustomed to a price rise every now and then. While many solopreneur clients will be supportive of your price rise, others may baulk at the news if it has been a while since your last price rise. So, get them used to a price increase every year, even if it is only by a few percent.
You’ve become more proficient or qualified
As I mentioned in my previous point, your skills will be improving over time, this means your prices should increase as a result.
If you’ve recently been certified, finished a course, or are consistently gaining great results for your clients, then your prices should increase.
Your conversion rate is high
Another sign it’s time to raise your prices is when you have a high conversion rate. What’s a conversion rate? It’s the percentage of clients who sign on with you after having a discovery call (or other type of introduction to you).
For example, if you have 10 discovery calls every month and sign on 6 of those clients, that is a 60% conversion rate.
But a high conversion rate is good, isn’t it?
Yes and no.
A high conversion rate is great for signing on new clients, but you have to ask yourself why the conversion rate is so high. Is it because your prices are too cheap, and the potential clients think it’s a bargain?
We don’t want this to be the case. So, evaluate your conversion rate and decide if a lower conversion rate but higher prices will be a good thing.
You’re attracting clients who bargain you down
If you’re attracting clients based on price point, then you’ll likely have clients who try to bargain you down in price. This often goes hand-in-hand with a low price point service.
So, if your services are low priced, you’ll attract the bargain-searching clients.
On the other hand, services with a more premium price point will attract clients who are focused on quality over price.
If you’ve been attracting clients who bargain you down, then it might be time to revisit your prices.
Some clients tell you you’re too cheap
If this wasn’t a clear enough sign, I don’t know what is.
Your prices will be based on what a client is willing to pay. So, if your dream client is hinting that you should raise your prices, then listen to them! When a client values the service you provide, they’ll pay premium rates for the privilege.
You have too many clients but not enough money
Business must be profitable otherwise you’ll not stay in business long. If you’re fully booked but aren’t earning enough money to earn a profit in your business, or pay yourself a wage, then you need to reconsider your pricing.
If you can work with fewer clients, while earning enough to make a decent living, then you’ll be better off. Not only will you be less stressed about being able to pay your bills, but you’ll also be less stressed in your work. You’ll get better results for your clients, who will in turn be even more delighted by your work.
Earning a decent living is a win-win situation for you, your family and your clients.
Is it time to raise your prices?
If you’ve been reading through this article and can relate to some or all the signs above, then it’s a good indication that it’s time to raise your prices.
You’re the owner of your business, and no one else can decide this for you. But hopefully this article has given you the validation you need to go ahead and raise those prices and earn more money in your business.
About the author
Michelle is a chocoholic, stationery obsessed Business Coach from the seaside town of Mandurah, WA. She specialises in working with Virtual Assistants and B2B service providers, helping them to grow a fulfilling, sustainable and profitable home-based business.
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