Is it ever the right time to raise prices? That’s the number one question I get asked from small business owners. And the most common reaction I get from clients when I tell them to raise their prices is “are you serious? I’ll lose clients“. In some cases, that’s a good thing. I find that raising prices weeds out the customers who you really need to get rid of. You know, the cheapskates who try to nickel and dime you on every line detail. The pest client who wants to micromanage to the second the amount of time you spend with them. Or the ones who just make up excuse after excuse to not pay their bill. I know we’ve all encountered those types. And if you had set your prices properly from jump street, you would deal with less of these customers and find more of those who are ideal.

I’ll tell you what I tell my clients. You are in business to make money. I’m not sorry, it’s true. Otherwise you are volunteering or running a non-profit. But guess what? Even non-profits need to make money to pay the bills. How do you think the lights stay on? All too often, people have a knee jerk reaction to what’s going on in the world around them, and use that data to make decisions that can be fatal to their businesses. It is a big mistake to be afraid to raise prices, but it can be suicide to lower your prices just because you’re afraid customers will leave you for the competition.

Are you trying to be a Target or a corner store?

I can tell you that Target does discount prices, but they do it on THEIR terms, not because customers dictate that they do. They also raise prices per market demands. And I don’t see people leaving Target because the prices went up. Each year you should be looking at the financial health of your company and tweaking where necessary. If a particular product line or service is not bringing in revenue either rework it so that it produces revenue or get rid of it. If people are jumping on the cheap pricing of services you offer, it’s time to really think about why. Are the prices so low that you don’t have enough time to service all of your clients and still make a profit? Then it’s time to raise them. Sure, if you’re charging someone $200 for a job that’s clearly worth $2,000 people will love you. You’re the affordable solution which makes you the default solution. It has nothing to do with your talent or skills and everything to do with being the cheaper option. And that may be fine for some people, but for me, that doesn’t fly. Sure people complain that my fees are high. But I don’t care. I’m worth every dollar and I deliver.

Let me give it to you this way. Let’s say you’re a gourmet chef, and the cost you pay out in ingredients per meal is about $75. And let’s say you’re only charging $15 per meal because you want people to be able to afford you and enjoy your food. Well at that rate, you’re burning through money. Each meal is costing you $75 in ingredients, but you’re only charging $15 per meal. You’re losing $60 per meal! It’s simple math. Look, we all want to be able to make customers happy, and we all want to be the preferred vendor. But we have to be realistic.

You have to focus on your pricing but you also have to focus on the cost for your to deliver the final product. And if there is a negative sign next to that number, you are in trouble, period. You cannot sustain a business with negative revenue. And you cannot price your services and products on what complainers say. Everyone wants a bargain. Hell, I love a great bargain. But follow your own gut. Buyers determine what they are willing to pay based on what’s in their pocket, checkbook or credit limit. That is THEIR problem, not yours. Simply put, if your customers are griping about your prices, they clearly cannot afford you or they are not ready to do business with you. This is when you take a stand an send them away until they can afford you. Sorry, I know it sounds heartless, but it’s the truth. Once again, you cannot go into a WalMart or the Apple Store and say “hey this price really doesn’t work for me. I can only afford this much” and expect them to just give you the item at a lower price. It just doesn’t happen. Sure at a flea market or garage sale, you can haggle. But for an established store, that’s just not going to fly.

Pricing should not be established based on appeasement. You’ve put in great time and effort to learn your skill or make your product. You have expenses associated with operating your business on  a daily basis. In other words YOU’VE GOT BILLS. You must start thinking of your business as a business and not a charity or non-profit. I’ll say it again, you’re in business to make money, preferably to make a huge profit. If you encounter people who complain about your prices, keep on moving until you get in front of the right kind of clients…those who can afford you. Stop chasing people down to do business with you then bartering away your soul just for the chance to say “I sold this“.  You’re not in business to be friends with your customers. If you choose to offer specials, discounts and limited offers, then do it on your terms. Don’t always make it about being cheaper than the competition. Never sell on price, always sell on value.

So now you have an assignment. I want you to sit down and list all of your products and services. Then figure out how much it costs to deliver each one. Once you’ve tallied that up, deduct expenses. What’s left? If you’re in the red or if that dollar amount doesn’t leave much wiggle room for much else, your pricing is too low. What are you afraid of? Raise those prices!

If you want to learn strategies on pricing, sign up for the “Profit is NOT a Dirty Word” Live Class. Don’t be afraid to earn what you’re worth.

Til Next Time,

Adrienne Graham
No, I’m not cheap, but I deliver results!

Check out my new book Get Recruited: Secrets from a Top Recruiter on Using Unconventional Tactics to Get Noticed in an Inconvenient Economy in paperback or on Kindle!

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Adrienne Graham is the Founder & CEO of Empower Me! Corporation (www.empowerme.org). She is a strategist that helps people grow their career, business or network in any economy. She is the voice behind Views from the Top Radio Show, and the creative visionary behind Empower Me! Institute and Empower Me! Magazine. Her writing and shows focus on Career Management, Networking Strategies, Entrepreneurial Success and Small Business Management. You can also find her causing a ruckus on Forbes.com.