Raising prices is one of the hardest business decisions most of us make. But when it comes to owning your own business, it’s one of the most important decisions for success. Keeping your prices in line with your requirements and the market helps assign value. Clients need you to set the bar.
Traditionally the time to increase rates is in October, so the moment to decide is now. I wanted to share some strategies that have worked for me when deciding if it’s time.
First Consideration: Supply and Demand.
Check your schedule to see how booked you are. If you are consistently booked 85% of the time over the last quarter, and you have not raised your prices in over a year, then it may be time. To calculate this, simply take the hours you actually worked and divide it by the hours that were available to be booked. Let’s say for the last 3 months, on average, you performed 50 hours of treatments, and you had 100 hours available on schedule. That would be 50% booked. This means you have some work to do to improve the percentage. It does not mean you can’t raise your prices.
Second Consideration: Pricing Based on Cost Factors.
Profit is a necessary evil to staying in business. No matter how altruistic your intention is, if you can’t afford to stay in business, you will not benefit anyone. Profit is a result of setting your prices so that revenue exceeds the true cost of doing business. When using this approach, you need to consider a few things. One is your pricing history (including current pricing), cost of living increases (for your salary), and increases in business expenses. Your first step is to calculate these before setting a rate. Calculate your monthly costs such as rent, business expenses, i.e., internet, phone, computer, website, other marketing, supplies, insurances, laundry, and keep in mind your time it takes to perform paperwork, marketing, laundry, and continuing education(which is required for most of us). Then add a reasonable living wage. Now take that total and divide the result by the number of hours you are available for booking.
If you figure $4000 for the month where you work 80 hours, then $ 50.00 per session hour should suffice. Keep in mind; if you have been radically under evaluating your work, you may not be able to jump the gap all at once. You may have to raise them incrementally over time, keeping your end goal in mind.
Third Consideration: What the Market Will Bear
This is where prices are established based on what the client expects to pay. You first must know the market you are in. Who is your target market? What are they used to paying for their massages and similar services? You have to also look at your location and the competition around you- Midtown vs. Downtown vs. the Burbs. You need to consider their amenities, scope of services, and experience/training of the therapists. Price is one of the major factors that people equate value with. If they are accustomed to paying one price point and you are well below that, they will be suspicious.
Pricing should be more than a difficult and distasteful task. It should be a successful business strategy. The next two parts of this series will cover the nuts and bolts of the implementation of increases and the marketing strategy to make it as painless as possible.
Be well, Do good work, and please share your pricing strategies.