Telltale clues your small business should charge more—and make more.
Lower may be better in a game of limbo, but not when it comes to your business’ prices. Scott Sorrell, a sales trainer and pricing consultant who calls himself “Mr. Charge Higher Prices” based in Southern California, has built a career helping companies raise their prices—and their profits. Here, he shares four warning signs that your price is not right.
You have more business than you can handle.
One of Sorrell’s clients, a freelance marketing consultant and search engine optimization expert, faced this dilemma several years ago when he found himself working until 2 a.m. most nights and still barely able to make ends meet.
By raising his prices from $500 to $2,500 per client, he doubled his income working with half as many clients. Today, he enjoys shorter workdays and more time with his family.
You face constant criticism from clients—even though you know your work is solid.
If your clientele is full of complaining, demanding lowballers instead of polite and grateful customers, your prices are too low, according to Sorrell. “Contrary to logic, low-end customers worry that showing you appreciation and gratitude might convince you that your product is so good that you should raise your prices,” Sorrell says. “So instead, they complain to try to fool you into believing that you’re worth very little.”
You only offer one version of your product or service.
If your business doesn’t offer at least three price points, Sorrell says you’re missing out on extra earnings. “If you add an enhanced, higher-priced item to your product or service lineup, plus an even more deluxe item at the top, typically most customers will be influenced toward your middle item, and some even to the premium item,” he says. Come up with at least two expanded versions of what you sell—add features, benefits or services.
You haven’t tested your prices.
“If you haven’t run any pricing experiments, you’re probably charging too little,” Sorrell says. “Customers are almost always willing to pay more than you believe they are.”
Price-testing techniques vary depending on the industry, but for retail companies with multiple locations, a frequent practice is charging different prices for the same product at different stores, then comparing sales figures. For service-oriented businesses, quote different prices to different customers—as long as these customers aren’t friends, colleagues or networking partners. Otherwise, they may compare notes and become upset. “What you want to find is the price point where you finally start getting resistance,” Sorrell says. “That’s not the point where you back off. That’s the point where you learn how to actually sell.”