Many business owners struggle with the idea of raising prices. Even in the current environment of high inflation and rapidly increasing costs for just about everything, many people struggle to raise prices. Sometimes it's in fear of losing good business, sometimes it's because raising prices feels like conflict and owners are conflict-avoidan. Other times it is because people have deep seated insecurities and low self-confidence, and feel like they simply aren't worth the extra fee. Regardless of the reason, raising prices regularly, to keep pace with the costs of running the business as well as remain competitive, is crucial to a business' long-term survival.
As Mitchell explains, the Pareto principle applies to customers and profits too: 80% of your profit comes from 20% of your customers. When you neglect to raise prices, the "bad" customers, that is, the low margin customers who cost a lot to service (in time, stress, and maybe even physical materials) and demand the lowest rates, become worse customers. Then the good customers -- your most profitable customers -- become bad customers, because you are continuing to charge them the same rates while your costs increase!
Raising prices regularly accomplishes several things for the business:
In a high inflationary environment, raising your prices in step with your costs may be the difference between making it or going bust. If you haven't raised your rates in a while, now is the time!
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Stupid Tax is now on Twitter/X! @stupidtaxpod
Mitchell Baldridge
Twitter: @baldridgecpa
https://baldridgefinancial.com
Scott Hambrick
Twitter: @hambrickscott
IG: @ogscotthambrick
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