Accelerating Sales to Scale your Business
New year, new prices. However, this is not the case for many business owners. During this episode, Paul shares some reasons why people might be holding back from lifting their prices and explains how to set and increase them.
01:20 – This is how I define pricing
01:42 – How often do you increase your prices?
03:50 – What could be holding you back to increase your prices?
06:25 – Three ways of setting prices
08:10 – Simple ways to increase your prices
09:20 – Three key actions from today.
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How often do you increase your prices?
I worked at Coca Cola for 18 years, and they were experts in lifting prices. In the early days, we used to do it once a year, but towards the end of my career, we used to do it at least twice a year. I know that Coca‑Cola is a product, not a service, so how does that apply to a service-based business? The key point here is that we used to lift prices every year and you should be doing the same.
The pricing increased Coca Cola was driven by a combination of rising input costs and market pressure to increase profit. But as a service business, your input costs are predominantly your labour. And typically, your time is the largest input, and then you’ve got your key staff. You’re constantly improving your service or your programs, and that should be reflected and rewarded by putting up your prices.
What could be holding you back to increase your prices?
- Don’t see yourself as an expert. But as I always say, you only have to be better than the person you are helping.
- You think you need more social proof because you haven’t done that for enough people. But you don’t need to have 100’s of examples.
- You’re worried about the competition. Do you think people buy on price alone? There are multiple factors as to why they buy from you.
- You haven’t lifted prices. A great Chinese proverb says, “best time to plant a tree was 20 years ago; the next best time is today”.
- You will lose clients. You may want to use a price increase to get the right clients on the bus.
Three ways of setting prices
- Cost-plus: The big misunderstanding here is people simply miss out on costs such as your time, your team’s time, the cost of sales and marketing, and the exchange rate differences if you work globally.
- Competitors: Price is not the only reason people buy from you, but it is good to look at what the competitors are doing. Ask your new clients who else they spoke to and what pricing and value prop they had.
- Return on investment: I use a simple rule of 10. So what I look at is the total value that I’m going to give over the 12 months, and then I asked for 10% of it, which leaves the client with 90%. How you calculate that can be a little tricky, but if you did it on gross revenue or whatever the service you’re providing, that’s a great way of pricing.
Simple ways to increase your prices
- On your next deal, increase your prices.
- If you have a membership, increase your prices. Add rewards for loyal clients by grandfathering their pricing.
- If you have difficult clients, raise your prices.
- Reduce over commitments.
Three key actions from today.
- Raise your prices.
- Make it at least annual.
- Ask me for more advice.
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