At the end of the year, most business owners are doing two things: Reviewing the year’s results and planning/forecasting for the New Year.
And, I’m sure that as you reflect on how your 2015 was, you’ll likely decide that while some things were good, there are some things that need work. Pricing is one of the most popular topics in any business building conversation, which also makes it one of the most misunderstood.
If you were to survey 100 business owners, you’d get 100 different answers about how they price their products and services. And Connie, who is being featured in this episode of Incredible Factor TV, is no exception. Check out her question:
“Hi Darnyelle, I’ve had an okay year this year in my business. As I reflect in preparation for 2016, I’m starting to think that I need to charge more than I did this year. Is now the right time to raise my rates?”
Check out my response to Connie’s question in this week’s episode of Incredible Factor TV:
As I share in the video, the quick answer is YES. More than likely, your prices aren’t taking profitability into consideration, and as a result you’re not charging enough to be profitable at the end of the year. Remember, profit is how we keep score in business, and having low rates that get you clients who are probably not your most ideal clients is hardly the way to raise the score in your favor.
Here are three reasons why you should raise your rates at the end of the year:
1. To connect with prospects on the fence or those who just never followed through to work with you. Raising your rates gives you a reason to reach out to low hanging fruit and previous clients and let them know that your rates are going up as of Jan 1 and this is the last time they can get your current year’s rates. This strategy is the perfect strategy to make December your best month ever. We always close the most new business in December for two reasons. First, because business owners are looking for one last write off and second, because we let them know that it will cost more in the new year.
2. To ensure that you are factoring in everything you should in your rates. At the end of the day, you need to charge more than it costs. Every transaction in your business should be a profitable one, which means you are making more than what it costs to break even. In my opinion, on a service-based transaction, your rate should be configured using the following formula: Direct costs + General & Administrative costs + Overhead + (your “hourly rate” * # of hours needed to perform the service) + % of profit you desire. Now, I know that this formula will likely take some getting use to, but it’s essential if you want to build a business that serves you.
3. To up-level the clients that you serve. It’s true that there’s a client out there for everybody. But, you’ll need to clarify if you want every client or the right clients who will value the contribution you make to solve their problem. If you desire the latter, you need to charge more, because the old adage “you get what you pay for,” is as true today as the day it was created.
So, now I want to hear from you. What’s your two cents? Why else is now the perfect time to raise your rates? What have you done at the end of the year to generate more new sales that Connie and others like her in our community could leverage?
©2015 by Darnyelle A. Jervey. All Rights Reserved. Darnyelle A. Jervey, MBA, The Incredible Factor Business Optimization Coach and Mentor, is the founder of Incredible One Enterprises®, Incredible Factor University® and the Leverage Your Incredible Factor System®, a proven step-by-step program so you experience financial and spiritual abundance in your life because of your business. For more information and a FREE audio CD “7 Critical Mistakes Even Smart Entrepreneurs Must Avoid for Clients, Connection and Cash Flow!” just fill out the form below.