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Raising Fees vs. Losing Clients

January 27, 2014

Business advice for women entrepreneurs and small business owners

earningmoremoney

Recently I was asked this question from a woman entrepreneur who belongs to our organization. She said, “It’s the beginning of a new business year and I need to raise prices but I’m afraid I’ll lose some clients but my profit margin keeps dwindling. What suggestions do you have for me Tracy?”

Her question is a timeless question – one most entrepreneurs face throughout their business career. I know I’ve struggled with this situation when I’ve been faced with rising costs, inflation and limited profits across two decades of operating my companies. Small business owners can be fearful to raise rates and lose potential clients while needing to raise more money to remain profitable. It feels like a Catch 22 of sorts.

Below are some of the suggestions I gave to our member. I hope they help you if you are struggling with the same business issue this year.

* Entrepreneurs start their companies by conducting market research, creating business plans, establishing sales strategies and pricing their products or services based on the research and corporate financial goals. These tasks should be repeated annually since economic times change, competitors enter the marketplace and expenses increase. Sometimes business owners must re-price their goods to remain profitable. Tip: Take the time to re-visit your business plan to analyze and make decisions on pricing changes.

* Re-pricing and then communicating increased fees to repeat clients isn’t an easy task. A well thought out sales strategy and public relations statement need to be created. Once you’ve completed those elements, communicate pricing changes honestly and succinctly in written form or at face-to-face meetings depending on the value of the client to your company. Tip: Create a PR strategy and timeline to communicate pricing changes with your customers.

* Keep in mind sometimes re-pricing isn’t the only thing entrepreneurs should consider. On an annual basis, business owners should review their list of products and services and determine which ones are profitable and which ones aren’t. Entrepreneurs must sell what brings in money. Tip: Review offerings and decide if you should remove any products or services to improve your bottom line.

Remember it is good business to make tough corporate decisions throughout your entrepreneurial career.

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One Comment leave one →
  1. January 29, 2014 4:07 pm

    Going along with your suggestions, I also like to take an annual review of my expenses and see where I can consolidate, eliminate, or even if I need to put more money into something. Sometimes I have found that taking a look at these can give me a better picture of whether or how much I need to change what I charge for my services.

    Like

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