From gas prices to groceries, milk to movies, the minimum wage to Happy Meals at McDonald's, everywhere you look, it seems the prices of goods and services are going up. With business owners everywhere raising their prices, why aren't you?
If you want your business to grow and thrive, you must increase your prices at some point—there's no escaping this fact. As I said in my book, Sell or Be Sold: How to Get Your Way in Business and in Life, "Businesses only fail because they don't sell in quantities great enough and at margins high enough."
Most small businesses stay small because they refuse to raise prices until they're forced to. This results in profit margins that continue to get squeezed while your cost of doing business only gets higher. This leaves you stuck in the middle, without the funds you need to expand, advertise, hire or reinvest.
If you haven't increased your prices for some time, here are five facts about pricing that may convince you now's the time to raise yours:
1. Everyone is raising their prices.
Chipotle, Colgate, all the airlines, Starbucks, Exxon and even Netflix have all either raised or plan to raise their prices by this summer. They each have a specific justification for raising their prices, but the bottom line is, they're going to do it, and, more importantly, they'll get away with it.
To continue to survive and expand your business, you must be willing to raise your prices to protect your margins. Price increases don't need to be explained to the public as much as they do to your employees: As much as the public might complain about a price increase, they almost always accept them. Just a few years ago, for instance, airlines didn’t charge for checked luggage. Now we pay extra for checking our luggage and even bring our own blanket, pillow and snacks.
2. People buy value, not price.
Customers don't buy price or discounts; they buy value and solutions. So unless you’re selling money, quit lowering your prices. Raising prices will force your salespeople to sell value. Procter & Gamble, Kimberly-Clark, Delta Air Lines, Neiman Marcus, Apple and AT&T all have competitors that sell their products and services for a lower price, but that hasn't stopped these companies from thriving.
People often use Netflix as an example of company that charges a lower price, but this is a misconception. Netflix isn't successful because of price—it's successful because it's available any time people want to view movies and TV shows. I can assure you, Netflix will raise its prices by the end of the year. Can you say Amazon Prime?
3. Customers will pay more for premium products and services.
If your business, location, product or service is truly special, you should be charging a premium for it. If what you're selling isn't special and lacks value, a lower price will not solve your bigger issue.
It's critical that you clarify your value and what sets you apart. I had a client once tell me that he could get the same thing I was selling for a cheaper price from the guy down the street. I responded, "I understand, but neither I nor my staff comes with the guy down the street." After thinking it over, he agreed to do business with me and paid my price. During my long sales career, I've said this same thing to thousands of clients, as there's always someone who will sell for less and clients who will point that out.
4. There is no shortage of money.
Don't buy into these doom-and-gloom messages of money shortages perpetuated by those who are trying to make sense of why their business is struggling. For every town that offers a haircut for $8, there's someone else in that same town who built their business around an $80 haircut. The only shortage on this planet are people committed to getting their piece of the pie. Customers will find money when they want something bad enough. This explains why it's not strange to see a $2,000 car with $4,000 worth of wheels and a $1,500 stereo system.
5. You can’t grow without dough.
Are you thinking about giving someone a raise, increasing your ad budget or awarding bonuses to your sales team? Then you absolutely have to think about raising your prices. Keep in mind that two-thirds of all businesses are only breaking even or losing money, which means a great number of companies either have prices that are too low, not enough value, or both.
The bottom line is, if you want to hire more people, expand and offer new products, continue to provide great service and truly own your market, you'll have to raise your prices. Everybody else is, so why not you? I'm going to raise my prices right now, and I can assure you the same people who thought my prices were too high yesterday will pay more today.
I just love free enterprise.
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