Raising prices can seem like it will cost you clients, but it can be the secret to growing your business.
When I last wrote about why you need to raise your prices due to the shortage of labor, it generated more interest and comments than most of my previous articles, so it seems like this is a very hot topic. One very common question is, “When is the best time to raise your rates?” There are two basic approaches. Like most things, there are advantages and disadvantages to both.
Raise your rates once per year.
Most people choose to do this right before they enter their busy season, usually Spring, although it varies in some areas. It is a lot easier to raise your rates all at once, and to make this a once-a-year project. By placing the increase right before your busy season, the idea is that if you do lose a few clients, then it is not a problem to replace them. Some of the disadvantages are: you will be taking all of your losses at once, plus it normally takes more than a year to raise rates for most people. For example, if you were going to raise rates this month, what would you do with people that have started services in the last 6 months? It may seem too early to raise their rates. You may decide to skip those clients and they will miss the first round of price increases.
Raise rates every month for clients that started service in that month.
With this model it becomes a monthly process to identify all the clients that started service one year ago and raise only their rates. This is a more sure way to make sure that everyone gets their prices raised. It also spreads the risk of clients cancelling service over the entire year, instead of all at once. The disadvantage of this method is that it can be hard to get to it every month. In your really busy months, you may miss some increases because you don’t have time to implement them.
Both methods can work.
The most important thing is that you do an annual price increase. If you do them every year, you will never have to shock your clients with a large increase. It will also enable you to give your employees an annual raise.
-
Tom Stewart is a CEO and industry thought leader focused on scaling residential cleaning businesses through strategy, systems, and leadership development, translating complex concepts into actionable frameworks. With his wife Janice Stewart, he co-owns Castle Keepers, the first company to achieve CIMS certification. Tom is the founder and CEO of MaidCentral Software, the leading business management platform for professional home cleaning companies in North America, and the founding editor and publisher of Cleaning Business Today. Learn more at TomStewart.com.
Founder and CEO
