Understanding When to Raise Your Prices
As a small business owner, you work hard for your business. It should go without saying that you – and your business – deserve to make an annual profit, and here’s the truth: you should raise your prices every single season. Every year you gain a host of experience, and it's important to charge appropriately.
An annual price increase isn’t just about being compensated for the wealth of experience you’ve acquired in the last year. It also accounts for inflation, increased in system and subscription costs, competitive labor compensation, etc.
When you think about how much money you spend on a business each year, don’t just think about hard costs for materials or money spent on staffing. You should factor in the time you spend researching travel, how long it takes you to curate social media feeds, monthly costs for programs you use, etc.
At the end of every year, it’s important to look back at everything let last year’s profits inform any intentional decisions – like when and how much to raise prices – for your business.
One of the best tools to realign and refresh your website to attract your ideal client is a quick audit of your pricing. And for February, we’re giving all of our Mae&Co Monthly members a quick spreadsheet that allows you to balance total income against total expenses to find your net business profit.
Here’s a snapshot of how this spreadsheet allows Mae&Co Monthly members to set profitability goals and adjust their prices for profit:
- Calculate Your Business Costs: Add up the total number of hours spent on jobs, administrative duties, social media, etc. and multiply this by your average hourly rate for employees (don’t forget to factor your rate into this too!).
- Add Up Your Business Income: This should be the total income from all client bookings – aside from travel costs .
- Total Income Minus Expenses: Subtract the total cost of your business costs from your income – are you making enough to re-invest in your business, set money aside from taxes and contribute to your retirement?
Here’s the bottom line: looking at the number of hours you and your team worked is vitally important. It’s the number one thing you can do to evaluate what you need to charge – or how many jobs you need to book – in order to establish the financial security you deserve.
There are so many different things that factor into building a profitable business - including how you charge for travel and extra services. We’re talking about all of this and more in our February Mae&Co Monthly courses focused on becoming profitable. Join our community to watch our four latest pricing courses and to get access to free pricing workshop opportunities in 2023 and year-round discounts…it’s worth it.
Watch the full course and over 100 more in the Mae&Co Monthly library.
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