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STEP 5
Adjust your prices
John Froggett
Founder of The Accountancy Practice theaccountancypractice.com
“Getting your prices right is vital to your success in business. Many small-business owners, sole traders and freelancers struggle over setting prices, especially when they first start out, often because of self-doubt or lack of experience. “To win customers, some set very low prices. They later find themselves working very hard, long hours, while earning very little profit. It can then be impossible to put your prices up significantly, because customers have become used to paying much less, so it’s better to get your prices right from the off. “Sound knowledge of your customers and competitors is crucial to setting prices. You must know how much people will pay for what you’re offering, as well as what value they can get from another supplier. That’s why market research is so important when you’re first starting out. “Prices have been rising significantly across the board for a long time now, so if you want to protect your margins, you need to increase your prices. Many businesses are reluctant to do this, because they fear losing customers. But if your price increase is justifiable, you’re more likely to lose customers you don’t really want. Good customers will appreciate why you’ve had to put up your prices.
John Froggett
“The key is to be transparent and explain the reasons why. Many customers will appreciate that you’re increasing your prices to continue to give them the same quality and service. It’s good to subtly remind your customers of the added value they get from you, because these things often go unnoticed.
of business owners believe getting your pricing right is a key piece of advice for someone starting a business.
“Where possible and cost-effective, find ways to sweeten a price increase. When we increased our prices recently we introduced a new service where customers could ring us at any time with queries, they didn’t have to make an appointment to come in and see us. “Some caution is wise when increasing your prices, because if you go too high you’ll lose more customers than your business can afford. Carefully assess your business costs to find out exactly how much they’ve risen and where. Then you’ll be able to work out how much you need to increase your prices. If a price rise is likely to damage your sales, you’ll have to settle for a lower price and a lesser margin – or find ways to cut your costs, although you should be on top of these at all times anyway.”