Every year, without fail, you and I get letters from all sorts of corporate companies we deal with and every year, they all sing from the same hymn sheet: “Blah blah blah your new price increase will be X and you’ll now be paying more than before.”
Your bank, insurance company, medical aid, cellphone company, even your kid’s school and almost everyone else will send you a nicely worded email, not even a letter anymore, all saying the same thing. They even attach Terms and Conditions with so many words on a page that even the best eye surgeon cannot get your vision perfect enough to read – and they’re the nice ones because at least they send an email, irrespective of the fact that you never even read it.
What about the petrol or diesel price increase, rates and taxes increase, electricity increase, toll increase and many others where you don’t even get the email. Just simply pay more next time we interact. Nice!
So let’s pause there, you as the business owner: When did you last increase your prices? Do you have, at the very least, an annual date where price increases are automatically communicated with all your clients? Do you have pre-determined ranges for variable input costs over and above which an increase is automatically put through to all your clients? Hmmmm … isn’t that interesting. Actually, isn’t that just sad.
When our ActionCOACH Business Coaches work with business owners, it’s frightening to see how few put through increases and even more frightening to see when last increases were actually levied. A recent client in the transport industry hasn’t put through an increase in 2 years. 2 YEARS!!! What has happened to the price of fuel, their biggest input cost, and still no increase. Ouch!
“Yes Coach, but if I increase the price then maybe they’ll leave”, is often heard. Well, if you don’t increase their price they’ll unfortunately stay and you’ll be squeezed dry until there is no more. Do you leave every time you get an email from a corporate company saying your price has gone up?
At the very least you need to account for inflationary increases which – get this – allow you to make no more money that last year. Your annual inflationary increase allows you to at best break-even in comparison to last year. That also disregards the increases, way above inflation, in fuel prices, energy prices, logistics, rent, food and even salaries of your staff.
So make the decision today to change this once and for all. Do the numbers today and calculate what the prices need to be and start communicating the increases with all the clients.
Keep the email/letter, informal, conversational and sincere. To assist you with the structure you might want to include:
- Thanking them upfront for their business and loyal support. Share how you value them as clients / customers.
- Share how you’ve done your absolute, despite the circumstances, to keep the increases as low as practically possible.
- Give broad reasons as to why the increases were necessary and include some of the real percentage increases you’ve faced and absorbed for so long.
- Think Win / Win and that you’re ensuring sustainability for all stakeholders by implementing the increases. This way you get to survive, the business gets to live another day, your staff remain employed thus not adding to the already overfull unemployment queue and most importantly they get to be serviced in the professional manner they’ve become accustomed to. Definitely Win / Win / Win.
- Accurately highlight what the increases will be as well as the full terms and details of the increases. Also remember variable pricing and variable increases so not everything has to go up the same amount at the same time.
- Allow for fair warning and give a reasonable timeframe before which the increase will be implemented. That way they’ve got the necessary time to make any plans they may need to make. It also allows you some additional time to do further discussions and negotiations with anyone that doesn’t quite understand.
- Ensure them of your continued commitment to them, and promise to continue to deliver the absolute best services and / or products you possibly can.
- Have a slight opening for feedback but don’t open the door for negotiation. ‘We’re happy to hear from you’ but we’re not wanting every single client to renegotiate.
Some closing thoughts on this. Have an annual increase date at the very least. At the start of the year, start of your financial-year, midway through a specific period, when you know most of your biggest input costs are increased or simply in the month it’s your birthday. Imagine a price increase every year as ‘your’ birthday present J. Pick the date and be consistent with an annual increase every year onwards.
Lastly, remember to include your biggest variable cost as part of your pricing strategy. Look at the example of the client with their transport company. Their biggest input cost is fuel so any price contract they enter into must have a clause that allows for automatic increases at certain thresholds as and when fuel increases. Figure out what yours is and include accordingly.
You simply cannot absorb all the increases and whilst not always easy, it is relatively simple to do price increases. Everyone else, bigger than you, does it every single year. You need to do it too. Good luck and if you need assistance make sure you reach out to your closest ActionCOACH business coach. We’ve got your back.