If You Are Maxed Out, Consider Raising Your Prices

By Action Coach Dave Beam

I recently met with a business owner that has been in a residential service and install business for over 20 years. He has about 10 employees, and his main frustration or complaint is that he is “maxed out”. What he meant by that is that he never goes on vacation, always has to be there at least 60 hours per week, and that he actually dreads the phone ringing and new customers at times.

My question was simple and to the point. “Why don’t you raise your prices?”

He went into a detailed response that made no logical sense to me. “Dave, you must understand that I must be fair and affordable in what I charge. I really work at keeping my prices down, and I would never want to gouge anyone. In fact, at times I discount to help someone out that can’t afford my services.”

Doesn’t that sound kind and generous? How kind is it to his wife and children? How kind is it to his employees who he really can’t afford to pay what they are worth? How kind is it to his vendors that have to call and ask for their money at times.

The bottom line is this. If you are not running a business that makes a clear profit AFTER you pay your employees, yourself, your vendors, and your business, you are on a hamster wheel that will eventually wear you out.

I challenged him to get a clear picture of the true financials in his business; things like fixed expense, break even, gross profit margins, receivables, and cashflow. I then suggested that he project his business outcome for a year based on increasing his prices 20%. Our rough estimates indicated a huge potential improvement to his situation. The disheartening part of this story is that unless he has a coach or someone to hold him accountable, it is unlikely that there will be a change. The status quo will prevail, and the business will not.

A business is a logical enterprise that runs quite well using logic and reason. It gets into trouble when emotional creatures take over. I absolutely believe that a prosperous, profitable business can be a huge blessing and freely give to many hurting people. And if you have a heart to do that, take the steps necessary to be in a position to give to others out of abundance and joy and not scarcity and guilt.

Discounting and bargain basement prices do not attract the best customers for most businesses. A good healthy pricing structure will create cash flow for you that will enable you to reach your financial objectives. You can take care of your customers, your vendors, and your employees as well as your family and yourself. You can give and be a source of blessing. It also communicates to your marketplace that you are a better business and offer a better product and service.

My question for you is this: “Why don’t you raise your prices?”