Anyone who runs a service company is well aware of the cycle: Your distributor tells you they plan to increase prices. Ugh! You’re frustrated initially, but you understand this is just part of doing business. You consider price-shopping other distributors in your area, but that’s work you don’t usually have time for. Unless the increase was completely ludicrous (not the rapper, that’s Ludacris) you probably just suck it up and move on. After a while, the whole thing fades from memory and you don’t even think about it anymore.
If that’s where you stop, you’re making a huge mistake. You need to increase your rates! If not, you are systematically narrowing your margin year after year.
That said, service techs are often super reluctant to raise prices, thinking they’ll chase off their customer base. But here’s the thing: They don’t like it, but customers expect prices for all their services to increase a little over time. They may not admit it, but they do. And if you do it the right way, increasing prices can be relatively painless. If you’re ready to raise prices, keep these things in mind:
What will the market bear?
You have to do your homework here. Whether you like it or not, you need to consider what your competitors are charging. Price shopping your competition periodically is a great exercise that helps you determine how much people in your area are willing to pay for the services you offer. It should also provide a little peace of mind — if your rates are similar to those of a competitor, you shouldn’t be afraid your customers will flock to someone else.
Be mindful of current inflation rates.
People tend to be more accepting of increases that are in line with the current rate of inflation. This is, of course, assuming that your current price structure is already in line with the market. You’ll need to keep tabs on this and adjust your pricing accordingly. Inflation rates change on a monthly basis, but altering your pricing monthly is a bit absurd. Adjusting your pricing on an annual basis will be more in line with increases from other vendors that your clientele already face. This will make your upward adjustment easier to swallow. The forecast inflation rate for 2019, according to Forbes, is 3 percent.
Timing is everything!
Let’s take a lesson from retail here. Most big-box stores implement price increases heading into the Christmas holiday, so October-ish. In the swimming pool industry, our Christmas is Memorial Day weekend. DO NOT wait until May to implement a price increase — this is a jerk move.
Give it a couple of months. I personally would advise you to implement an increase in the first week of April. That’s far enough away from the official start of pool season and most likely unnoticed due to the crunch of tax season.
Never EVER let the invoice announce the increase!
Don’t forget the 80/20 rule. Like most companies, 20 percent of your customers (give or take) account for 80 percent of your business. You should know who these customers are — if you don’t, go figure it out! — and give them a phone call to alert them of an impending rate increase.
If you’re nervous, get over it. You need to put on your Big Boy/Big Girl pants for this one. If you’ve done your due diligence in fostering a good relationship with your top 20 percent, most will be understanding and appreciate the phone call. And don’t chicken out and leave the news in a voicemail; it sends a message that you’re afraid to break important news to them (which is bad, considering how you do that quite often in this line of work). It also makes you look like a frightened kid who doesn’t believe they deserve the money they are asking for.
RELATED: The Psychology of Pricing
What if you lose customers?
Yes, you might lose a customer or two, but that’s the nature of business. If you handled this process in a tactful manner and didn’t implement a ridiculous price increase, the fallout should be minimal.
If they go, let them go! Of course this philosophy depends upon the size of your business, but ultimately you do not want to have customers who are only with you for price. This customer is not really your customer anyway — their allegiance is to the dollar, not the level of service that you offer. With price-focused customers, it’s a question of when they’ll cancel your service, not if.
It doesn’t matter whether you’re a single-pole service tech or manage a fleet of techs — you will need to raise your prices from time to time. If you do good work and provide great customer service, you can confidently charge what you’re worth. The right customers will stick with you no matter what.