How to Price Business Services
- Do raise prices when your competitors are raising prices. If the competition has upped the ante, that is a good signal that the market can and will support a price increase for your services, too.
- Do raise prices if your customers say you're a bargain. If your customers start commenting about what a great value your services are, that "may be an indication you're charging too low a price," Osteryoung says.
- Don't raise prices too much all at once. In a tough economy, a big jump in prices might be too much of a jolt for your customers. Instead, raise prices in small increments of two or three price increases over the course of a year, Osteryoung suggests.
- Don't raise prices across the board. Do be discreet. Customers may not notice price increases if they are only for certain services and not for others. Osteryoung recalls speaking with a dentist who recently raised prices on fillings but not cleanings -- a strategy that brought no customer complaints. "You need to raise prices in today's economy where you think your customer can't see there has been an increase," he says.
The bottom line is: You owe it to yourself and to your business to be relentless in managing your pricing strategy. Remember, how you set the price of the services you sell could be the difference between the success -- or failure -- of your business.
Related Links
The Price Is Right Setting prices has always been more art than science. New software aims to change that.
The Right Price
Too many new entrepreneurs harm their own prospects by underpricing their goods and services. But if those company owners just take the time to think, they can set their prices closer to fair market value.
Is It Time to Raise Prices?
Boost your bottom line by taking the guesswork out of pricing.
Flexing Your Pricing Muscles
Despite years of almost no inflation, you may have more pricing power than you think. Here's how to exercise it without bruising yourself in the process.
Recommended Resources
Neverrunoutofcash.com
This page has some of the best business books and audio programs you can read. Most are focused on improving profitability and cash flow.
How to Sell at Margins Higher than Your Competitors: Winning Every Sale at Full Price
by Lawrence L. Steinmetz, and William T. Brooks
This is book discusses the importance of margins in setting prices. It is available at any online or traditional bookstore. The authors also conduct do seminars and have audio programs on the subject of selling at higher margins.
The Art of Pricing: How to Find Hidden Profits to Grow Your Business
By Rafi Mohammed
The author has a very interesting point about how to get out of the pricing 'Catch 22' by adopting a multi-price mindset.
SurvivalWare
SurvivalWare is a software tool that shines the light on your cash flow and profitability. Everything you do in setting prices must be measured by the degree to which it helps you make money and create cash flow. It is powerful, yet easy-to-use.
U.S. Small Business Administration's "Pricing Your Products and Services Profitably
This guide discusses how to price your products profitably, plus various pricing techniques and when to use them.
Risk Management Association's Annual Statement Studies
One of the few sources of benchmarking data from the financial statements of small and mid-sized businesses that are customers of RMA. Broken down by industry, this data can be used to help you set prices for your services.
