The Big Picture - September 2012 - (Page 16)

business ++ management business management How to Raise Your Prices By Marty McGhie D uring the course of the past few years, most of us have had to deal with the struggle of increasing costs to our business while ﬁghting our way out of the recent recession. Regardless of whether you believe we have o cially managed our way through the recession or not, one thing is clear: It’s more expensive to do business now than it was a couple years ago. But despite the hikes we’ve experienced in the cost of doing business, few of us have felt all that comfortable going to our customers with price increases. As a result, we’ve seen our proﬁt margins continue to decrease. It’s unrealistic to expect that we can sustain this downward proﬁt trend for much longer. It’s time to reverse the wheel, and get our proﬁts trending back in the right direction – by managing to increase our prices, while continuing to maintain customer satisfaction. On the rise Whether my company’s proﬁts were up or down, our cost of doing business seemed to maintain a steady pace during the recession. Interestingly, nearly all of our suppliers held the line on prices during even the worst part of the recent recession. Like us, they were ﬁghting to stay in business and couldn’t a ord the risk of losing customers to price increases. In the past year, however, virtually every one of our suppliers has raised prices at least once; some have done so two or three times. So our shop’s material costs clearly have increased, and I suspect that you have found yourself in the same position. Likewise, labor costs in our industry also have increased MARTY MCGHIE is VP ﬁnance/operations of Ferrari Color, a digital-imaging center with Salt Lake City, San Francisco, and Sacramento locations. He is the author of Business + Management for Digital Print Providers + Sign Shops (ST Media Books, stmediabooks.com). marty@ferraricolor.com substantially. Good employees are now much more willing to move around to look for better paying jobs. And in spite of national unemployment numbers still being relatively high, the fact is that securing a solid employee for your business will now cost you more money. While it was easy to justify salary and wage freezes in 2008, 2009, and even into 2010, by now most businesses in our industry have given raises to their employees. Many have even given multiple raises to their valued employees as a reward for sticking with them through the tough times (and to help retain those employees). All of these cost increases beg the question: Why are we willing to increase our costs of doing business but reluctant to raise prices for our own customers? I believe that during the recession a lot of us experienced a shift in our relationship with key customers. Suddenly, customers were much more concerned about pricing than ever before. Many, in an attempt to lower their own costs of doing business, were required to obtain multiple bids on their projects. And even though our customers might not admit it, quality and service took a back seat to the need to get pricing as low as possible for their own survival. Jobs you would have never lost to an inferior competitor sometimes slipped away from you solely based on lower prices. Now’s the time As a result of all these factors, now might be a great time to have a discussion with your key customers about pricing. A successful strategy for this particular conversation should include a couple of important aspects. First, be sure that you’re providing signiﬁcant value to your customers before you approach them about pricing increases. If your relationship with your customers is based heavily on price and you’re only viewed by your customers as the supplier with the lowest prices, then you will probably have a signiﬁcant challenge in raising your prices. The ability to sit down and discuss pricing increases correlates directly with your company’s capacity to provide “value-added services” to your customers. It doesn’t >41 16 THE BIG PICTURE SEPTEMBER 2012 http://www.stmediabooks.com

Table of Contents for the Digital Edition of The Big Picture - September 2012

The Big Picture - September 2012
Contents
InSight
Wide Angle
UpFront
Business + Management
The Training Track
Dye Into Print: Focused on Fabrics
Imaging Indulgence: SGIA Expo 2012
The Cure for Media Madness
R+D
Job Log

The Big Picture - September 2012