I need to put my prices up to meet growing costs, but how do I do this without alienating my clients, particularly in the current economic climate?
Before you make the decision to put up your prices, you need to make sure there's nothing you can do internally to absorb increasing costs. Have a look at your cost base to see where you can make some cuts, and do a review of your suppliers to ensure their pricing is still competitive.
Once you're satisfied that you've done everything you can inside your business, you need to have a think about how much you need to increase your prices to cover your costs, and how much you have at risk by taking this action.
Put yourself in your customer's shoes and ask yourself how valuable your product is to them. How readily available is it from other suppliers? How will your new price compare to your competitors? How easy is it for your customers to get up and walk down the road to get a better deal? Asking these questions can help you identify how much you have at risk, and what you can do to prepare yourself for the market response.
All up, the best way to increase prices without alienating your clients is to communicate with them. Make every effort to help them understand why the increase is necessary, what you're doing to absorb mounting costs within your business, and don't forget to tell them how important their business is to you. Being honest and transparent is always the best way to deliver bad news, but take caution not to get too carried away. The last thing you want to do is worry your customers into thinking your business is vulnerable and won't be around for the long haul. Give them enough lead-time to plan for the increase and offer every opportunity for them to ask questions. If the increase is justified and you're taking care to make sure your customers are well-informed, there should be no negative effect to your business's bottom line.
Mark Bouris is executive chairman of the wealth management company Yellow Brick Road. His advice here is intended as guidance only. If you have a question, email it to Larissa Ham at firstname.lastname@example.org.