Hopefully, you may have raised your prices over the past couple of years to keep up with your changing costs. Even so, you probably need to raise them again. And if you haven’t raised prices, you definitely need to raise them. Here are six reasons why.
1. Your Costs Have Risen
Duh. Of course, your costs have risen. Everyone is paying more for everything. You are too. Unless you raise your prices to cover the increases you are experiencing, you are subsidizing your customers. Do they need your subsidy?
Moreover, your costs are going to increase more. Once the election has passed, the drawdown of the Strategic Petroleum Reserve will likely halt and gas prices will resume their ascent, leading to increases in the price of everything that uses petroleum or is transported by vehicles powered by gasoline or diesel, which is pretty much everything. More inflation is coming. Price ahead of it, so when it arrives you are not behind the curve playing catch up.
2. You Are Probably Not Charging Enough
Most plumbers did not charge enough when inflation was less than 2%. Now that inflation is in the 8% to 9% range (or higher according to the website, ShadowStats.com), undercharging is likely a much more widespread phenomenon. You must bump your prices at the inflation rate just to stay even. If you consider inflation the way it was measured before 1990, prices need to jump around 17%.
3. The Greatest Price Resistance Lies Between Your Ears
Consumers expect to pay more for everything today. Most have no idea what plumbing work costs to begin with. If they think you are expensive, they will object. If they think you are a bargain, they will keep quiet. Thus, you probably get to hear about it when someone thinks you are charging too much, but never hear about it when you charge too little. The tendency in these circumstances is to extrapolate the complaints across your entire customer base and think everyone believes you are expensive. That is your fear speaking, not reality. Raise your prices and the number of complaints will likely stay the same.
Do not be afraid of the occasional price complaint. Be afraid of their absence. Unless you are receiving a price complaint or two, you are charging too little.
4. You Add Value
Some customers simply cannot do what you do. You make their homes and businesses more sanitary, more useful, and more livable. This is added value. People will pay for it. If they call you, they expect to pay for it.
Other customers are capable of making basic plumbing repairs, but choose not to, just like some people pay others to mow their lawns. The reasons vary. Some value their time more than they value the money they pay to you. Some dislike the work enough to pay someone else to do it. Whatever the reason, you are still adding value.
5. Your Team Deserves Higher Pay
Your team does not live in a cocoon. Their expenses are going up and they need boosts in pay to maintain their standards of living. If you don’t give it to them, someone else will. To increase their pay without taking the money out of your pocket, you must increase prices.
Frankly, it is a good idea to raise pay and prices in tandem. Help drive the association of higher prices with higher pay for your team. This reduces their reluctance to stand tall when presenting the cost of a repair. It also makes them more willing to offer higher priced options instead of just offering the cheapest solution.
6. You Deserve a Higher Return
Your business is likely your greatest personal asset. You put your capital at risk every day you operate it. This is the difference between a business owner and an employee. You put capital to use and risk its loss. For this, you deserve a solid return on your investment. Unless you earn that return, you cannot reinvest in your business or invest in your employees or the community.
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