Why raising prices is good for your business


Many SMEs we see are highly committed to excellent customer service, doing well by their clients and building a great reputation as a result. For many customers this is the reason that they seek out smaller companies in the first place.


But while aiming for a quality service is never a bad attribute, underpricing can mean that your business doesn’t reap those rewards. Many entrepreneurs are afraid to raise prices in the fear of losing clients. Every customer counts and when you are pursuing growth, losing even one can be painful.


However, as an SME you should avoid competing on price - every sector will have larger, scaled players who will be able to outcompete your price with their economies of scale. But what they won’t have is a personal, customer centric service. This is a key advantage for SMEs and can position your brand at a premium.


So set prices to reflect this. While some customers will inevitably be scared away, you will be left with a set of customers who highly value your services and are happy to pay a premium for it. In our experience, after a price raise, your total revenue will not fall but margins can grow as your business is left with fewer customers generating a higher revenue. Typically, the customers who leave are smaller and less profitable who generate a lower margin and are unlikely to buy further services.


When done right, controlled price increases can be a great lever for value creation. It shows that the business understands the value to brings to it customers and has the healthy commercial instincts.