One of the biggest challenges entrepreneurs face when starting their small businesses is knowing what their product and service prices should be. It may take some time and perhaps some trial and error to reach the best price point. And once you reach an ideal price schedule, it may change.
You have more work than you can handle
If you have a waiting list, are too busy, or are managing delayed orders, these are all signs that you might be able to increase your product and service prices. If there is demand, the market is likely to respond positively to a price increase.
Your competitors are charging much higher prices than you
Don’t focus entirely on what your competitors are charging, but regular research on their prices can help ensure that you aren’t underpricing and that you remain competitive. Remember that low prices may bring you some business, but in the long run, it might not be worth building a reputation as the cheapest provider in the area.
You’ve tested higher prices and made sales
One way to test the waters for a higher price point before moving to it is to offer a higher price to new customers who request a quote. If you do this several times for new customers and win the bids, it may be time to widely increase prices.
Your business costs are increasing
Business expenses continuously increase for most small business owners, and your prices should reflect that to remain profitable. Track your budget and ongoing expenses, and use the numbers to determine a fair price increase that will cover the costs of staying in business.
You offer premium service or a unique product
If you provide a service or sell a product that no one else in your area can offer, it makes sense to have a premium price. Start by exploring how your business differs from the competition and what unique value it offers, and use that as a basis for raising prices.
Your prices have been stable for more than a year
Many business owners raise their prices once a year as standard practice. If it has been a year or more since you raised your prices, you may want to assess your business position in terms of the market and competition, and see if there’s a need to raise prices.
Now that you’ve decided it’s time to raise your prices, you’ll want to make the change in a way that strengthens your relationships with your customers, not send them to another provider. Use these tips to raise prices when you start.
Source: https://www.thebalancemoney.com/when-to-raise-rates-2951602
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