Have you actually put your prices up this year? Or have you just quietly absorbed rising costs and carried on? if it’s the second one, you’re far from alone.
Many business owners we speak to haven’t reviewed their pricing in years. They set their prices when costs were lower, kept customer happy, stayed busy and simply got on with running the business.
But with the Budget now behind us and costs continuing to rise, there’s no better time to ask a simple question: Are your prices still covering your costs?
Your costs have been creeping up all year
Most cost increases don’t arrive in one dramatic hit, they build up gradually. Wages went up in April. Suppliers have nudged up their prices. Fuel, energy, software subscriptions, the van service…..each one on it’s own feels small but it’s impossible to ignore. Together, they can take a sizeable chunk out of the profit you make on every job.
The result? The work keeps coming in, you’re as busy as ever, but there’s less in the bank at the end of the month. That feeling of being as busy as you’ve ever been but not getting ahead is often one of the first signs that your pricing hasn’t kept pace with your costs.
Why haven’t you put your prices up?
There are plenty of reasons. You worry about losing customers, especially the loyal ones who’ve been with you for years. You’re worried that a price increase will make you look expensive and you don’t want to look greedy. And if you originally set your prices based on what felt fair, or what the business down the road was dong, it can be hard to know what the ‘right’ price should be today. So the easiest option is to leave things as they are. Unfortunately, that doesn’t stop the costs from rising.
A simple way to check your pricing still works
You don’t need a spreadsheet for this. Pick your two or three main services that you offer and for each one, work out what it actually costs you to deliver each one.
Start with the obvious stuff:
- wages of whoever does the job, including employer costs on top,
- plus any materials and
- travel and vehicle costs.
Then add your overheads, the things you pay whether you’re busy or not like
- insurance,
- rent or premisses costs,
- software subscriptions,
- phones and internet
- vehicle and equipment
Finally, include something many business owners forget: Your own pay
Many business owners calculate cost without valuing their own time. The result is a business that looks busy on paper but delivers very little reward to the owner.
Once you’ve added everything together, compare the total cost with what you are currently charging.
If there is a healthy margin great.
If the gap is getting smaller, or there isn’t one at all, you’ve got a clear indication that you pricing needs attention.
Look for the warning signs
If you use Xero or Quickbooks, compare this year with last year.
Ask yourself:
- Is there less profit left from each job than there used to be?
- Are direct costs rising faster than sales?
- Are you having to work harder to earn the same amount?
Even small changes can be a warning sign that your prices are no longer keeping pace with the cost of delivering your services.
What to do with the numbers don’t add up
The most obvious fix is a price increase. For many business owners, that’s a uncomfortable conversation. But it’s worth remembering that our suppliers have probably increased their prices, your customers have seen costs rise elsewhere, and most people expect reasonable price increase from time to time.
Keep the message simple, give customers plenty of notice, and explain the change clearly. You’ll often find that far fewer people object than you expected. In fact, the customers who push back hardest on fair price increases are the least profitable customers.
Not sure where you stand?
Sometimes it’s difficult to look objectively at your own numbers. That’s where a second pair of eyes helps. At Fresh Clarity, we work with business owners across Shropshire who want to understand what’s really happening in their business, not just file accounts and move on.
If you’d rather talk it through with a real person, get in touch. We’ll help you make sense of the numbers and identify where profit might be quietly slipping away.
Have you actually put your prices up this year? Or have you just quietly absorbed rising costs and carried on? if it’s the second one, you’re far from alone.
Many business owners we speak to haven’t reviewed their pricing in years. They set their prices when costs were lower, kept customer happy, stayed busy and simply got on with running the business.
But with the Budget now behind us and costs continuing to rise, there’s no better time to ask a simple question: Are your prices still covering your costs?
Your costs have been creeping up all year
Most cost increases don’t arrive in one dramatic hit, they build up gradually. Wages went up in April. Suppliers have nudged up their prices. Fuel, energy, software subscriptions, the van service…..Each one on it’s own feels small but it’s impossible to ignore. Together, they can take a sizeable chunk out of the profit you make on every job.
The result? The work keeps coming in, you’re as busy as ever, but there’s less in the bank at the end of the month. That feeling of being as busy as you’ve ever been but not getting ahead is often one of the first signs that your pricing hasn’t kept pace with your costs.
Why haven’t you put your prices up?
There are plenty of reasons. You worry about losing customers, especially the loyal ones who’ve been with you for years. You’re worried that a price increase will make you look expensive and you don’t want to look greedy. And if you originally set your prices based on what felt fair, or what the business down the road was dong, it can be hard to know what the ‘right’ price should be today. So the easiest option is to leave things as they are. Unfortunately, that doesn’t stop the costs from rising.
A simple way to check your pricing still works
You don’t know a spreadsheet for this. Pick your two or three main services that you offer and for each one, work out what it actually costs you to deliver each one.
Start with the obvious stuff:
- wages of whoever does the job, including employer costs on top,
- plus any materials and
- travel and vehicle costs.
Then add your overheads, the things you pay whether you’re busy or not like
- insurance,
- rent or premisses costs,
- software subscriptions,
- phones and internet
- vehicle and equipment
Finally, include something many business owners forget: Your own pay
Many business owners calculate cost without valuing their own time. the result is a business that looks busy on paper but delivers very little reward tot he owner.
Once you’ve added everything together, compare the total cost with what you are currently charging.
If there is a health margin great.
If the gap is getting smaller, or there isn’t one at all, you’ve got a clear indication that you pricing needs attention.
Look for the warning signs
If you use Xero or Quickbooks, compare this year with last year.
Ask yourself:
- Is there less profit left from each job than there used to be?
- Are direct costs rising faster than sales?
- Are you having to work harder to earn the same amount?
Even small changes can be a warning sign that your prices are no longer keeping pace with the cost of delivering your services.
What to do with the numbers don’t add up
The most obvious fix is a price increase. For many business owners, that’s a uncomfortable conversation. But it’s worth remembering that our suppliers have probably increased their prices, your customers have seen costs rise elsewhere, and most people expect reasonable price increase from time to time.
Keep the message simple, give customers plenty of notice, and explain the change clearly. You’ll often find that far fewer people object than you expected. In act, the customers who push back hardest on fair price increases are the least profitable customers.
Not sure where you stand?
Sometimes it’s difficult to look objectively at your own numbers. That’s where a second pair of eyes helps. At Fresh Clarity, we work with business owners across Shropshire who want to understand what’s really happening in their business, not just file accounts and move on.
If you’d rather talk it through with a real person, get in touch. We’ll help you make sense of the numbers and identify where profit might be quietly slipping away.