- Increase your prices.
This option might feel a bit scary for the small businesses with loyal customer. Will your customers feel betrayed? If you raise your prices, will they come back? These are reasonable questions to ask, but also, they can fairly easily be put to rest. Obviously, nobody wants to pay more, but, if you think about it, people choose your business for many reasons beyond cost, such as:
- Your great reputation.
- Excellent customer service.
- Your quality and selection.
- The expertise you bring to bear.
Let's do a little thought experiment: Think about why YOU frequent the businesses that you do. Surely there's a business you love because it is right down the street, and surely there is another that treats you right every time. With both, it is not the price that is the dispositive factor, is it?
So too your business.
Back when I practiced law, this is something I personally encountered. I was a young buck then, hungry to grow my nascent business. Because I was young and new, I charged less, and it worked. By undercutting the competition, I got more business.
But here's the thing: I quickly realized that I didn't want to become known as "the low-price leader" as it were. I needed to raise my prices, for my brand, if nothing else. I started by testing my new higher hourly fees on a few clients . . . and was happy to discover that the sky didn't fall. I then rolled out my new fee structure across the board. While I did lose a few clients along the way, that was more than made up for by my higher fees.
So, the secret here is, if you want to make more money, you can, and safely, by raising your prices. Don't be afraid to be candid with your customers about the price hike–honesty truly does go a long way, and most everybody can understand an occasional price hike.
If you still aren't confident that customers will stick around after a price increase, you could just test the increase temporarily, commitment-free, and see if it flies. If it does, away you go.
- Sell more.
Maybe increasing prices isn't the right choice for your business for whatever reason. Fair enough. In that case, there is still another great option for you: Sell more. Pretty simple, right?
Selling more means making more.
Have you heard of the 80-20 rule? The 80-20 rule will help you sell more and make more money. According to the 80-20 rule, 80% of your sales come from 20% of your products/services, or from the top 20% of your customers.
That means that the question is this: What makes up your top 20% of products/services? Do you know who your top 20% of customers are? Once you can pinpoint the answer to this, you can figure out where your most lucrative sales are coming from, and from there, you will know what products and services to concentrate on. Look at what types of things the top 20% of customers purchase most and double–or triple–down on those. This is a sure-fire way to make more money.
The other surefire way you sell more is to lower your prices. Have a sale. Offer discounts to best customers, or launch a loyalty rewards program. Apply an across-the-board price cut. And of course, when lowering your prices, be sure to advertise it.
All of this then begs the question: When should you raise prices and when should you lower them? It all depends. Keep these guidelines in mind:
- Lowering prices gets more people, but people with less to spend.
- Raising them gets you in front if fewer, but more affluent, customers.
Either way, be sure that the route you pick reinforces your desired brand. The bottom line is that although making a profit sometimes feels like a mountain, using either of the options above, it is now a mountain that you have the right tools to climb!