When Should You Raise Your Prices?
I wrote about this a few times before, but it's time to address it again...When should you raise your prices?
There are plenty of reasons to raise your prices regularly, but most people are reluctant to do it because they're afraid to scare customers away. If you don't raise your prices, though, you'll eventually be the one quitting the business because you'll have so much business at a low profit you'll burn out.
Keep this in mind when you raise prices: People EXPECT prices for everything to go up over time. Nobody thinks that the price they paid for something will be the same in ten years, it just isn't realistic. The problem comes for us as business owners when we're trying to figure out how much to raise them, and when to do it.
In social psychology there are two methods to change people's minds on issues. One is to just jolt them into it, like throwing someone into the deep end of the pool. That tends to backfire, though, because people will fight it. The other way is to do it gradually so that people adapt to changes a bit at a time without really feeling that they have to defend themselves from the change. The gradual way is slower, but it will result in less resistance.
I think that the best way to raise your prices is the gradual method, but you have to do it on a regular basis. Twice a year, increase your per-serving cost by a fixed amount. Even if it's only a 5% increase, doing it gradually will ease people into it, and many of them won't even notice that you've done it. You'll lose fewer customers that way.
On the other hand, if you increase your prices a lot all at once, you'll definitely lose some customers, but you might still come out ahead financially since you'll be charging more. This could work to your benefit if you're working less for more revenue.
You need to decide what your comfort level is. If you tend to have too much work, I'd be inclined to raise prices more all at once. That will eliminate the lower-priced orders and ease your schedule a little. If you're not totally booked all the time, I'd do the gradual increase on a regular basis to increase prices slowly but steadily. You should also keep an eye on what your competition is doing. If you're the only person in your area who isn't doing regular price increases, you're selling yourself short and you need to keep up!
When's the last time that you raised your prices? If you can't remember, go start your planning now, and set a goal to have prices up in a couple of weeks. You can use the increase as a selling tool..."Book now before prices go up!"
Kara Buntin owns A Cake To Remember LLC, online cake supplies at www.acaketoremember.com and www.acaketoremember.etsy.com