Cold, hard winter ahead? 10 tips to keep toes warm, costs down and spirits up
Finance‚ Legal & Tech
Should small businesses increase prices during the cost of living crisis?
by team Holly & Co
For small businesses struggling with the cost of living themselves, knowing if (and how) to reset or increase prices can be difficult. How do you tell people about it? Will you lose customers? Are you now asking too much or will you come across as being greedy? The short answer is that there will always be people ready to spend money on beautifully made products no matter what the climate. The worst thing you can do now is to sell yourself short. Holly held an emergency SME: SOS Instagram LIVE to discuss this very topic with some extra special female founders: Rebecca McMillan from Wildflower Illustration, Mika Wassenaar from Siamese Dreams and Charlie Deeley from Big Bakes Bakery. Here are their top tips…
5 golden rules for pricing
1. Don’t underestimate how unique you are
It’s not usually wise to set your prices solely by looking at the competition. You have your own story, brand, service and more. Your pricing must reflect how unique YOUR business is.
2. Don’t devalue your time
Your job should be fun but that doesn’t diminish the value of what you make. If you devalue your time, you are devaluing the whole industry’s time, too. Setting prices too low is counter-productive.
3. Don’t price based on your perception
Always remember: It’s not your perception of how much something’s worth or what you would pay for a product that matters but what other people would pay for it and what it’s worth to them.
4. Don’t be afraid to explain your prices
Clarify why you’re charging what you are. Whether it’s how long a product takes to make, the quality of materials you use or a rise in supplier costs. Help customers understand.
5. Don’t assume people aren’t spending money
Even when times are hard, there will still be people spending money. Plus some might spend less on themselves but still buy gifts, for example. Don’t underestimate the shopping potential.
Can finding efficiencies mean you don’t need to increase prices?
Everyone’s different. Rebecca from Wildflower Illustrations shared how she made the decision NOT to put up the prices of her beautiful cards and prints this year, as she was worried about the impact on customers. She recommends doing an audit to see if you can balance costs by other means. Can you find ways to be more efficient to reduce your outgoings somehow? Or could you launch your Christmas offering earlier to give people more time to shop? Want to know what they’ll be buying? Holly’s predictions for this year’s festive trends might help.
If you do need to increase prices, how do you do it well?
Mika, founder of Siamese Dreams, explained that she was so incredibly nervous before sending an email to customers to let them know about increasing her prices that she felt physically sick — but she just knew it needed to happen. All her costs were rising, from labour and artists’ fees, to the price of the natural fabric they use. So how did she let people know? Mika said that she thanked customers, pointed out what the increases were for, how much they would be, and when they would come into play, so they had a window of time to still order at the current price.
She believes in being transparent and respects her customer community, so was just open — and the response was incredible. People wrote to her and said how much they appreciated this and that they still wanted to support her as a female founded business. She actually saw a rise in sales, which helped her value herself and her time more.
Have you done recent market research to adjust pricing if you need to?
Founders often don’t get round to doing up-to-date research to determine pricing, and so what once seemed like the right amount when you first launched might not be accurate today. When Charlie from Big Bakes Bakery joined Holly LIVE, she explained how they tried and tested products from all the local sellers and discovered that they were charging £2.75 for their bakes while others were charging £3.50 for theirs, despite being a quarter of the size. Charlie said this helped her see that they had to adjust prices and that she could see the new ones were fair. She also diversified. Big Bakes went to more food fairs to help make up the shortfall. Charlie’s advice was that if you’re going to increase prices, now is the time as other businesses are, too — yet you need to stay true to you.