It’s an age-old question that is challenging for both new and established businesses alike. How much should you charge your customers for your business’ products or services? And when is the right time to increase prices?
In this article, we will explore some of the factors at play when it comes to considering increasing prices.
Review sales versus expenses
One of the easiest places to start when considering increasing your prices is reviewing your business’ sales and expenses. By keeping a close eye on your business expenses and how much you are selling, you can identify whether you are charging too much or little for your products or services.
It’s all too easy for expenses to rack up, from fuel to phone bills. Tracking your expenses regularly can really pay off, as you’ll be able to easily spot areas that need attention. For example, your phone contracts may be up for renewal and you may be able to negotiate a preferential rate.
Saving on expenses means that you can reduce your costs and increase your profits without the need to increase your prices.
On the other side, if your business costs have gone up then that will need to be reflected in the price you charge for your products or services. Make sure you aren’t missing out and that your costs are properly covered in your pricing structure.
Using Pandle’s reporting feature, it’s even easier to keep track of how your business is performing financially. You can even export data into Excel to analyse performance in more detail.
How much is my time worth?
It’s all too common for business owners to overlook the value of their own time when running a business. The amount of time you need to spend to provide a customer with a product or service, and the amount of experience you have in your area of expertise, should be reflected in your prices. For example, it might take you just 15 minutes to turn around a customer service, but that’s because you have 15 years’ experience in your industry. That needs to be reflected and accounted for in your pricing. Don’t underestimate the value of your time and experience.
Benchmarking prices against competitors’
Doing your research can pay off. Most businesses will know who their closest competitors are, but it’s important to continually review competitor offerings. It’s the best way to ensure that you are still competitive within your market. If your competitor has decided to close its office and work remotely, there may be cost savings that are passed onto its customers. You will need to review your offering and unique selling points within the market. Doing so ensures that your customers are still receiving the best service and you’re maintaining maximum profitability.
Most businesses review their prices on a yearly basis, reflecting the cost of living and rising costs of materials. It’s a good idea to build time into your calendar every year to plan ahead and consider reviewing your prices.
Pandle’s Cash Flow Forecasting feature helps businesses to set future cash flow goals and view trends in cash flow, helping you to make even better decisions.