Vol. 7. No more arbitrary price increases
đș Buckle up, this is a long one.
You know what advice I'm beyond sick of hearing?
RAISE YOUR PRICES! CHARGE YOUR WORTH!
I got to thinking about this because in the online course space, there is this idea that you should increase the price of your programs almost every time you launch. I disagree. And I haven't raised the price of my programs in 2 years. During the height of inflation, I opted to keep prices the same, reduce payment plan fees, and even in some instances, reduce the price of some programs (like the workshops--I used to charge $47.)
Some might argue that discontinuing the use of a discount is effectively a price increase; but I think it depends on the way those discounts are used. If you always show things on a discount as a pricing psychology tactic... then yeah. If it's a true limited time discount and otherwise the product or service is being sold (and people are buying) at full price outside of a certain window, then it's simply... charging regular price. But I digress.
Even when I added features and updates to programs... I didn't raise prices. And my P&L showed it last year. And I feel similarly about my bookkeeping firm prices. So today I'm going to focus on that side of things.
Yes, there are certain circumstances that warrant a price increase, and real situations when people aren't charging for the value of their work:
- You've underpriced and aren't profitable on a service
- You are at capacity so you are pulling the supply vs. demand lever
- Scope increases
- Real value increases
Before I dive a little deeper into each of these, I want to address the "charge your worth" piece first.
As I'm writing this, we are on the final day of The Bookkeeping Biz Workshops. Everytime I host these, we get lots of "new bookkeepers" into our world. Some are experienced corporate accountants with CPA licenses and some are truly brand new to accounting and bookkeeping, and everything in between.
What they all have in common is lack of confidence in their skills, whether real or perceived. That is why they joined the worshops.
You know which side you sit on if you have any amount of self awareness.
I refuse to sit here and perpetuate the idea that "anyone can become a bookkeeper and begin getting clients right away." I truly believe if you do not understand the foundations of accounting (degree or not), you have NO BUSINESS taking on clients by yourself unless you commit to hiring someone to look over your work. Or work for someone else to gain the skills with oversight.
If you know accounting, you know that the foundations of accounting serve as a double check of your work. Everything must balance.
If you don't know how to check your work, go find the education to get to that point, please. Focus on learning the skill before you split your focus on also learning how to build a business. That's so much at once, and you will crash and burn.
Ok, now with that soap box out of the way, if you're still here, let's chat about raising prices and when it actually makes sense--and isn't just an arbitrary price increase.
1. You underpriced from the beginning
We all start somewhere, and usually that is a very low price point. We don't yet know how long things will take, how complex they'll be, what level of effort we will need to communicate with clients, overhead costs, and not to mention, that "confidence" piece. So we typically underprice, thinking it's competitive, but we need to go through this phase in order to prove to ourselves: "I can do this, I'm good at it, and I'm finding ways to be more efficient."
This is true whether you charge hourly or flat monthly. We all screw this up at the beginning. Not really anyway around it.
(if you didn't screw ip here at the beginning, good for you! You were probably somewhat overly confident or a really good sales person/have done this before! But you're the exception, not the norm)
This is when it's ok to increase your prices with each new client, to test your selling skills and test the market to see what it can handle as far as pricing goes. Basic economics. Speaking of economics...
2. You're at capacity
This is when you NEED clients to leave, or you need to hire in order to create capacity and only want to bring on clients that are willing to pay more. You can afford to lose one client that isn't happy with the price increase in order to create capacity. Because the remaining clients who receive the price increase will cover the loss. Win win.
Most of us are actually terrified of this scenario and don't truly believe it will work. But most of the time it does. You're a math person. Do a little math, figure out how to make this work if you spread the increase across all the clients so that you can afford to lose one or two. Run a few scenarios. Look at it objectively.
3. Scope increases
Next week have the actual need to increase prices because there has been true change in scope; you're doing more work, things are more complex or volume has increased. Time to rip off the bandaid.
I'm currently in a situation where I need to increase prices on a couple clients because the anticipated scope is not what the reality is. I actually have to rescope all of our clients for something we used to say was unlimited because a couple clients are really taking advantage of that (probably unaware of the amount of work it creates for us--and no, it's not communication... it's bank accounts) Arguably this could fall into being "underpriced" but I'm calling it increased scope instead.
4. Real value increases
Lastly, this is probably the greyest of areas because who determines how much value is being provided? This requires careful consideration, case studies (prior successes) and sales skills. This really is only something that you can do for new clients coming on; it's not something that you change on a current client--unless they're asking for additional help not included in the original scope. And then... that's just an amendment and scope increase.
This also requires testing the market to see what people are willing to pay for the value you're providing. And it requires understanding what individual clients find valuable.
For some it's fast turnaround of reports. For others it's access to you. Each client has different value drivers and it's your job to find out what those are when in discovery, so you can position yourself as the solution and present the value you bring.
so...
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