What Should I Do To Raise My Prices?
Steven Kohnke: All right, so here we are with another episode of Coach's Corner, where the experts here at Denver Business Coach take real questions and challenges from real businesses and we discuss to uncover possible solutions. And today I'm here with our expert coach Cindy Carrillo. And our question for the day here is
"I have a service business and struggle with raising my prices. I haven't raised them in more than two years, and now I feel like my clients expect to pay less for my services. What do I do to raise my fees without losing clients?"
That's a great question. I think for us to talk about Cindy, what are your first thoughts here?
Cindy Carrillo: You know, I've heard this before in terms of working with some clients. It's a real struggle, especially with smaller businesses who are within the first few years of business where you develop a pricing scheme and you put it out there to your clients, and you kind of get in the rhythm and the flow of doing the work and along the way, you kind of forget to raise the prices for them. And so I get that, I absolutely hear that. And I, you know, I think one of the things that I've coached some of my clients with, and you can let me know if you've done it differently is that it's a great opportunity to have a conversation with your current clients about the work that you've been doing for them and check in with them at that point.
Are you happy or what are the things that we could be doing moving forward and use that as a discussion about continuing the relationship? And then at some point in that conversation, you can't be afraid to talk about money and be able to say, Look, we've done that. I'm so glad you're happy and I so want to keep working with you. But moving forward, you know, we haven't raised prices in two years. And based on the work that we've just discussed, let's discuss now what it would cost and what the budget should be for doing this work moving forward.
So even though it's scary to have the conversation, I think it's a great opportunity to touch base with your clients and then move them up, not just in pricing, but in the work that you're doing for them.
Steven Kohnke: And I think doing it that way till you get good, you get good feedback, you know, the feedback loop is important from the people that you're working with. And so not only get the chance to introduce the pricing conversation, you get some good insight into the work that's being done. Have you done any sort of, or what's kind of been your approach to help people as far as having that conversation? Is it, you know, as they come in, for instance? Or is it kind of like a blanket communication or kind of curious about how that would be communicated?
Cindy Carrillo: I look at different times of the year for them as the opportunity for them at the end of a quarter. At the end of the half-year market, we pick something at the end of a project as the sort of benchmark time that you can have that conversation and having it face to face or having it on a Zoom call or being able to talk with the client directly. I think it's about the review first and then the looking forward and just I think we should do that anyway on an ongoing basis. But I also think that it's a great lesson to learn that what we need to do has not become complacent about the fees that we're charging, especially in a service business. And we and even with product, because what you always have to do is reassess what your cost is, what the time is with the value of what you're offering is and keep factoring that in to make sure that your margins stay where you want them or increase over time. We all have to pay our dues at the beginning. We were all probably undercharged at the beginning so that we could get business, and we're not quite sure what someone's going to pay for it. But once you've got a couple of years under your belt and you've got a track record working with people, I think you want to welcome the opportunity to have the money conversation. And as business owners, as people who are providing a service or a product, being able to talk about money with our customers or our clients is a fundamental part of what we need to be able to do.
Steven Kohnke: It's a scary part for a lot of business owners, I know I've worked on this type of project with a few clients, and that's one of the bigger challenges for them as business owners is overcoming that, that fear, you know, in this specific question, it's the fear of losing clients, you know, with a raised price. So, you know, it's a chance for your customers. And how I've looked at that for a handful of clients is the communications making sure the lines of communications are open and you're giving people a chance to internalize your kind of giving a target of saying, Hey, a month from now. Yes. Up, you know, you're kind of you're not saying, Hey, now this is going to happen or during the service. It's like, by the way, prices are increased, but you're giving time to people. You're giving people time to really come to terms with it and make sure that they're not surprised. And that's where I think drop-offs will come is when customers and clients are surprised by an increase
Cindy Carrillo: And there's no context. I think having the conversation where you're creating a context of let's go back and look at what we've done together, look at what if it's a product, look at how much you've been able to buy, what have you been able to sell? What have you been able to mark it up with? If it's a service, how is it increased your business? How have we supported you, what value have we created? And I think it's good for business owners to actually go through that process of reassessing their clients. One, it makes them stickier. I mean, who doesn't like that kind of conversation from a vendor that they're working with is, I need to check in with you. How are we doing? I mean, let's talk, and let's adjust, and let's move forward together. We're committed to this relationship. That's never a bad thing. And if they decide that they can no longer work with you because you've had to raise your prices. Sometimes that's not such a bad thing, because those kinds of conversations usually start to happen when you realize with new clients, you're able to charge more, and so now you've got an imbalance of you've got your early clients who are being charged at a much lesser fee potentially.
Cindy Carrillo: And you've got newer clients coming in and you start to look at where you want your business to go and the value of what you're providing as a service or a product. And I think as business owners, we start to get more confident when we see that with new clients, we can charge more. So then we need to not necessarily bring our first few clients that started with us up to where our newer clients are coming in because they get a little bit of a break because they were our first right and that's OK. But over time, that kind of attrition is not bad. The problem becomes you raise your prices too much and you're not selling at the price the new prices that you need to. Then you've got a problem. But I think, I think adjusting your prices along the way and doing it in a thoughtful manner that you can justify that is, to your point, done in a communicative manner that gives people forewarning that the price is going to come up. That's how businesses grow.
Steven Kohnke: Yeah, yeah. The review factor that you mentioned, I really like it's almost like taking inventory for yourself, too of what is the value I'm being able to provide. Can I provide more? Yeah. And is the time that I'm dedicating towards that value worth what I'm currently charging. So I think that's great. I think you know, get some really good tips there. So hopefully anyone that's having this type of struggle of raising their prices, when to do it, how to do it, what to really plan for, how to communicate it got some value from this. You know, we talked about checking in with clients about how things are moving forward. Talking about the value, adding to the services. What's being done there? Don't surprise them. And then, you know, maybe some attrition isn't always the worst thing for your business growth.
Cindy Carrillo: So it's not. It's a hard pill to swallow, sometimes on the front end. And you're right, the conversation's scary, but it's something that I think when you're in business, it's something to learn as a skill set to move forward. To be able to talk about money is a good thing.
Steven Kohnke: It is. It's necessary. Well, great. Cindy, thanks for your input here and being able to raise prices, and we'll talk on the next coach's corner here.
Cindy Carrillo: I love it.