If you are a consciously building a business, this next statement may surprise you:
Believe it or not, there are some entrepreneurs who don’t raise their prices.
I know; it shocks you but trust me, it happens. I’ll use the groomer where I use to take Latte for example. I had been taking Latte there for 6 years and the price never adjusted. Not once in 6 years.
And I have some bad news for you: This is the first sign that you aren’t effectively building a business. I mean really, if you’re not raising your rates its because you don’t respect your business as a true problem solver for those you’ll serve.
The cost of living goes up every year and so should your prices. Period. This is not for discussion unless you want to remain a hobbyist and not effectively build a business.
That’s why when Luanne’s question came in, I couldn’t wait to answer it as one of the final episodes for 2013:
“Hi Darnyelle. I feel like I have been living in a time capsule in my business. I have been charging the same rates for more than 3 years. I actually had a client pay me more recently because I haven’t raised my rates since she’s been a client. This may seem like a silly question, but how do you go about raising your rates?”
Watch my response to Luanne’s question in this week’s episode:
In full disclosure, I believe that having a systematic way or approach to raising your rates is ideal in your business that is if you are really building a business.
Oftentimes before we can even get to raising rates, I have to help my clients deal with their underlying issues with money consciousness and their level of self-worth/ deserve. You see, if you struggle with your level of deserve, you will likely struggle in setting your rates. Now, as much as it shouldn’t seem like this is the case because you’re a business owner, most solo-preneurs really have created a job for themselves and become self-employed instead of becoming business owners. According to the US Small Business Administration, 22 million of the 28 million small businesses are comprised of non-employers (solo-preneurs, also known as the self-employed)
Now, once you’ve dealt with your underlying issues, you’ve got to start by asking yourself a few questions:
1. What is the amount of revenue you want to earn in your company in the next year?
2. How many clients do you want to serve in order to make that amount?
3. What products and services do you offer and will they make achieving your revenue goal possible?
The reason these are my first few questions is because it’s seldom about what you’re selling but it is always about how you price and package it. And in your business you’re creating a wealth stream for you and your family. Also, I want to determine if you’re thinking logically about what having a business means. So if you’ve determined that you only want to work with 20 clients over the course of the year, the simple math tells us what you should charge. Then, I’d ask you to validate your prices and ensure that you still have a profit margin of at least 75% after all of your fixed and variable expenses are paid based on that amount. If the answer is yes, that should be your current rate. If the answer is no, you have to adjust accordingly. And let me also just say that when I am working with a client, there are several things that we evaluate when setting prices but in general this is a great place to start.
Then, you should make it a practice to raise your rates, even if slightly, at least once each year. If you are in a service-based business who consistently gets amazing results for your clients, you’ll likely want to raise them twice a year.
Now I want to hear from you, what’s your two cents?: When was the last time you raised your rates? What was the methodology that you used to do so? How often do you raise them? What if anything stops you from raising them as you know that you should?
©2013 by Darnyelle A. Jervey. All Rights Reserved. Darnyelle A. Jervey, MBA, The Incredible Factor Speaker, Business Coach and Marketing Mentor, is the founder of Incredible One Enterprises.com, Incredible Factor University® and the Leverage Your Incredible Factor System®, a proven step-by-step program for more clients, more income and more leverage in your business. For more information and a FREE audio CD “7 Critical Mistakes Entrepreneurs Must Avoid When Unleashing Your Incredible Factor So You Attract More Clients, Make More Money and Gain More Leverage” just fill out the form below.