Right now, as I write this blog it is July 2021. Inflation has been hitting the economy. It costs more to buy everything just about. Gas went from $1.49 to $2.59 in Texas over the last 10 months. That is a 73%+ increase. That alone will make every vendor, store etc you deal with in business and your personal life RAISE prices on you. That means your income buys you less today than it did a month ago, a year ago.
We coach sales, and part of sales is what you actually charge your customers for your products and services. Now, I know some of our SalesSCALERS clients have no control of price. You are just the salesperson, right? True! Some of our clients are the actual owner yet maybe you sell something like car insurance, so you do not have control over price. Then, we have the owner that does control what they sell their stuff for.
So why is this blog important for you all? Simply, because it is important to know how much money does your customer have to pay for your product and service. Inflation effects sales. Remember our recent post on “Who Truly Is Your Competition?” (https://salesscalers.com/who-competition/) where we talk about getting as big a share of your client’s wallet.
Inflation is reducing the size of the cash they have in their wallet. That means if there is less to go around, then you have to truly show that your product and service deserve a piece of their wallet. You will have to be better at selling the value of what you have.
Does your value hit emotionally on their desires for happiness? Desire to look good to their boss if they buy from you? In inflationary times, it can become harder to sell just because of this fact alone.
Now, for those of you that get to control pricing for your product and service, the two questions are this:
- Did you raise prices this year?
- Can you raise them again in the same year?
Let’s take the first question. You need to be raising prices EVERY YEAR! No if and or butts about it. Every year, at the same time raise prices. We can talk in more detail on how you communicate that to your clients and customers in a coaching session, but I won’t dive too deep here today. But yes, raise prices annually. Why?
There are many reasons:
- Cost of doing business has gone up
- To have money to innovate and invest back in your company to provide the best to your clients and customers
- To invest in education for your team and you for again, to provide the best to your clients and customers
- Cost of labor is going up and you need to give your team a raise to keep good talent
- Give yourself a raise to keep up with inflation
- Because you are worth it
- To increase your profit margins
- Clients expect it
- Trains your clients to do the same in their business
- And many more…
But Scott, my clients will leave me. Some will, and some that do did not value your service and product anyways and they are NOT A or B level clients. Let them leave!
You can afford to lose some clients and still make more profit if you raise prices.
Wrap your head around some math. If you have a 30% profit margin, and you raise prices by 6%, you need to lose more than 17% of your clients to make less money. What does that mean? Simply, if you do not lose 17% or more you actually make more money. (Email us for a matrix on all the numbers: [email protected])
In the last four weeks I have received the following price increase on products I use:
- QuickBooks: from $40 to $50 per month – 25% increase
- Calendly: From $15 to $16.24 – 8.27% increase
- Netflix: $12.99 to $13.99 – 7.70% increase
- And many more…
This year my client Recharge Relax raised pricing from $65 to $80 depending on the service to a flat rate of $90 on my suggestion for their massage/spa services. You know what the clients said? “Thank you! Now I can just book one session and the price is $90 and you can determine what I need for that session.”
One of my Accounting firm clients is struggling to hire people because they are not paying enough. We need to increase salaries in this tight labor market to get good talent to help the clients. Rates must go up or my client makes much less money for the same amount of work.
Right now, you should be looking at your profit margins, and raising rates. Oh, and not just say 2% – 3%. You should be looking at 8% – 15% increases. Your clients will be fine with it, as long as you create the right messaging behind it.
Go raise rates NOW! You will thank me for it later 😊