Why you must raise your prices!

Wayne Bettess here, I have been a heating engineer for over 18 years. I’ve witnessed the boom times and the bust times, this is why I feel we fellow trade professionals are being left well behind when it comes to what we earn.

Over the past 15 years our industry prices have been very stagnant!

Back in 2002, when I started my career as an apprentice plumber, the company whom I worked for charged £65 + VAT for a full boiler service, £600 + VAT labour for a boiler swap and £400 + VAT labour for a power flush.

Do these figures sound familiar? If so I suggest you read on…

Almost everyone I have approached about this subject has instantly expressed that they are fearful of raising their prices, common reasons are :-

• “ I will lose a lot of my customers”
• “ My customers will complain”
• “ They have been loyal customers so it’s not fair”
• “ I haven’t got the confidence to do it”

Yes… the above (and more) reasons are valid objections, BUT (it’s a big but) at the end of the day, your business is there to serve its customers, if you are not running your business at a fair and healthy profit margin there is not a Fair Exchange and one of the first things to slip is the service your customer receives. To be blunt you have to stop focusing on the negative reason as to why you shouldn’t raise your prices and start focusing on the POSITIVE reasons as to WHY YOU MUST.

Let’s get technical…

In the examples I’m about to give below, I am only going to use The Bank of England Inflation rate over the past 15 years. (Inflation, in brief, is how much £1 can buy you at any given time in the past compared to the present). I’m not even factoring VAT rises on a day to day goods we buy and the higher taxes most are paying, which would compound this issue even further.

In 2002, when I started my career, the price for a boiler service was circa £65 + VAT based on The Bank of England Inflation figures you would need to get £95 + VAT to be in the same financial position in 2018. Basically what you could buy with £65 in 2002 would in today’s values cost you £95!! When we use bigger figures it really starts to hit home how far off a lot of small businesses are from reality, see some examples below:-

2002 – Labour charge for 1 Boiler swap                              – £600.00 + VAT

2018 – Inflation based labour charge for 1 Boiler swap        – £950.00 + VAT

2002 – Labour charge for 1 Power flush                              – £400 + VAT

2018 – Inflation based Labour charge for 1 Power Flush      – £620 + VAT

2002 – Labour charge for 1 Boiler Service                           – £65 + VAT

2018 – Inflation based Labour charge for 1 Boiler Service    – £95 + VAT

Now let me increase this further

So you can see the huge impact it has, examples below now assumes 30 boiler swaps a year, 10 Power Flush a year and 288 Boiler services ( 6 a week for 48 weeks a year).

2002 – Labour charge on 30 Boiler Swaps                          – £18,000.00 + VAT

2018 – Inflation based labour charge on 30 Boiler swaps     – £28,500.00 + VAT

2002 – Labour charge for 10 Power flush                            – £4,000.00 + VAT

2018 – Inflation based Labour charge for 10 Power Flush    – £6,200.00 + VAT

2002 – Labour charge on 288 Boiler Service                       – £18,720.00 + VAT

2018 – Inflation based on 288 Boiler Service                       – £27,360.00 + VAT

Based on the assumptions above, if your charges have remained pretty much stagnant you would be £21,340.00 worse off today compared 2002!!!

• The cost of goods and services increased by 58.5% over this period. Source: Hargreaves Lansdown
• Figures based on the Retail Price Index (RPI) as at August 2017. Source: Office for National Statistics.
• Above figures are estimated figures and

HAVE I GOT YOUR ATTENTION YET?

It is Unsustainable NOT to Increase your prices…

If you are not making a fair and healthy profit margin, you can not serve your customer effectively. As there has to be a fair exchange in all transactions. Increasing your prices will also increase the service you can provide (well it should!!). You will be able to invest back into your business, improve systems, process, training, innovation etc.

Although you may not think it, our customers are human just like us. We only have to look at our own behaviour to get a gauge to how our customers will react when we increase our prices. In the majority of cases, if a product/service we buy goes up we accept it. It’s just the way it is and we simply accept it and carry on as normal. We may have a moan & groan about it but in general, we just accept it… SO WILL YOUR CUSTOMERS!

Stay tuned for my helpful tip sheet detailing a number of strategies to help you implement raising your prices to improve your business, your income and your service to your customers.

I really hope this has opened your eyes as to the need for you to raise your prices if this helped you please share it with a friend, family member or work colleague.