What Price Says About You

(Thank you, Giphy)

Several years ago, a CEO whose company I had helped took me to lunch. We had barely spoken because I’d worked with his head of sales.

He said to me, “I owe you thanks. Because of you, I sold my company for life-changing money.”

I asked him how.

He said, “Before you came in, we weren’t winning enough business. Tough industry, very competitive. I told my head of sales to get some help. He called you.”

I asked him to elaborate.

He said, “He came back and said you were expensive. I told him to just pay you and if it didn’t work, we’d drop it.”

I groaned internally. I’d let his head of sales grind me down on pricing, because I wanted to work with them. We developed a great relationship, and they went onto a great outcome.

But I’d left money on the table. Money that wasn’t even a rounding error to them in the grand scheme.

I wish I could say that’s the only time I’ve made that mistake. But I’ve made it before.

Too often, we lack conviction in what we’re really worth. Sometimes our customers or clients know our value more than we do.

Don’t be afraid to ask for what you know you deserve. The worst they can say is “No.”
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If you read these often, you know most of the material is geared toward helping you with the “How?”

Today, not so much. This is more about the “Why?”

Why you should consider raising your prices.

Chances are, you’ve thought about it. Wanted to do it. Maybe even tried it.

There’s usually hesitation around pushing prices up. If you’re not selling enough units at your current rate, what happens when you go higher?

(Thank you, Giphy)

Guess what? That fear isn’t unique to you or your industry.

Wherever I can, I push clients to raise prices. Not every industry can withstand this, but more can than do.

Yes, there are models built around the low-cost value prop. BCG pushed this without reserve in the 60s and 70s… and it worked for some businesses, but not all.

Because winning on price requires a defensible low cost structure internally, one your competition can’t replicate.

That often requires something proprietary that most businesses don’t have. Chances are, you don’t have it.
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But about pricing higher.

Who would’ve thought people would pay $5 for coffee before Starbucks?

Or that people would pay $1 million per year to work with a coach before Tony Robbins?

Yes, they both built brands, but there are other examples of small businesses charging significant premiums. It usually involves establishing themselves as the go-to provider for a specific solution in a specific market.

But we’re not even talking about that (yet). We’re talking about small increases. 5%, 10%, 15%.

Increases that signal to your market that there’s something different about your solution.
And often, customers don’t shop or compare. Despite your fears that you’re priced too high.

(Thanks, YARN)
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I recently worked with a professional services firm. We got their close rate up by 70%… and then increased prices. There was no drop off in closed-won business.

None.

We’ve done it in software. My client had gone in with a penetration price (to win people…) and then tripled the price 2 years later. Very few customers complained.

Quickly – what would raising prices 10% (assuming the same amount of clients) do for your profitability?

If your fixed costs are covered, and you don’t have a heavy variable burden, an additional 10% falls to the bottom line.

What reasons might your CUSTOMERS have for you to raise your prices?

Consider this – as you grow your business, you need to make more investment. In people, technology, training, processes, marketing, business development, client retention, HR, and more.

None of these are getting cheaper. Everyone who can raise prices (for the most part).

That software company – they reinvested in growth. Better support, better functionality, better products for their customers. It’s a virtuous cycle.

(Thank you, ELGL)

And to feed that virtuous cycle, you need good people.
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You likely pride yourself on what you deliver for customers. As you grow, you’re going to want to trust the people handling it.

And they’re not the cheapest. They’re raising their prices, too.

The more you can charge, literally, the better work you can do. Sales. Marketing. Customer service. Quality control. Engineering. Operations.

Which benefits your customers: better attention, better detail, better service, better outcomes….better reputation… better referrals… better customers… better outcomes.

The right customers will appreciate it. And pay you.

They’ll be happier, and so will you. Which leads to more of the right customers.

Consider it.
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A very quick note on the “How?”

I work with a commodities trader. They’re truly in a price business.

Here’s what I’m teaching their traders.

There’s a difference between a customer asking, “What’s your price?” and “Do you have it?”

When we get to the latter question – if it’s even available – we have a different conversation, one where we can price for profit, not just volume.

It’s a mindset, a skill, and a posture. It changes the game.
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Have questions on some of the “how?” Or questions on how to mitigate risk in increasing prices?

Shoot me a note.

P.S. The guy I talk to on pricing is Per Sjöfors.