How to Raise Prices

My latest column in PROFIT Magazine looks at raising your prices as a way to grow your business. It includes interviews with two Canadian entrepreneurs - one from the East Coast, one from the West - who have remade their businesses in order to justify charging higher-than-market prices for their goods and services.

Excerpt:

My research took me to the Vancouver suburb of Coquitlam, where Bob Burnham and Jeff McCallum run a disaster-recovery services firm called BurnMac Services Inc. Founded in 1976, BurnMac enjoyed many great years. But by the 1990s, competition had increased and margins were falling.

Burnham and McCallum have learned that too many people charge too little for their services. “Small businesses are really undercutting themselves,” says Burnham. “They’re so close to being successful. If they raised their price just 5% to 10%, it could change their lives.”

It’s a matter of margins. Let’s say you’re a typical service business grossing $1 million a year and making a profit of 3.5% to 4.5% of sales. “You’re working your tail off for $40,000 a year,” says Burnham. But if you can raise prices 10% while keeping costs steady, your net income becomes $140,000. Your profit margin has more than tripled.

Read more about how to raise prices here.