MBA972 When to Raise Prices + Free Ride Friday!

Hey there. Today is Free Ride Friday, so make sure you hang on to the end of the episode so you can hear who won this week's free ride. All you gotta do is leave us an itunes rating and review. And every week we do a weekly random draw with anybody who's left us a review to see who won a free ride to one of our programs. This month we're giving away easy course, a 30 day course on how to build your own online course. It's a $500 value, but you can win by just leaving us a review. It's our way to say thank you for showing us love on itunes. All right, let's jump into today's episode. Hey O. Welcome to the $100 NBA show, the business podcast that's always got your back with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the hundred dollar MBA a the complete business training and community online over at 100mba.net and in today's episode, you will learn when to raise prices. If you have a business, a product, a service, and you've been in business for some time, you might be asking this question, when is a good time to start upping my price? Listen, it's inevitable. You're going to have to raise your prices at some point. You're just not going to be profitable for very long if you don't, because of inflation, of course, but also your business is improving, your products are improving. So it means the value that you're giving is increasing. So subsequently your prices should increase as well. Now you don't have to raise your prices every day, of course, but in today's episode I'm going to explain when are the best times to raise prices. So it's best for you and your customers. So let's get into it. Let's get down to business. Today's episode of the $100 MBA show is supported by the Running Remote Conference. When we started the 100 RMB and our software company Webinar Ninja, we intentionally chose to make our team a remote team. You get access to the best talent around the world and you can keep your costs low with no office overhead. Some of the biggest companies in the world are now going completely remote. If you want to learn how to build and grow a remote team, then you got to check out the Running Remote conference over@runningremote.com I'll be speaking there in beautiful Bali where this conference takes place. I'll be talking about how to motivate your remote team beyond compensation and a whole lot more. And if you go to runningremote.com before April 1st, you can save 25% by using my code 100 MBA 25. That code is only valid until the end of day March 31st, but if you happen to listen to this, after March 31st, you can use code 100 MBA15 and save 15% again. That's runningremote.com I hope to see you soon. When it comes to raising prices, a lot of us do not want to do it because we feel like we're going to upset our customers in some way. And the best way to think about this is to look at the products or services that you enjoy and ask yourself, what would you do if, let's say, for example, Spotify went from $10 a month to 11 or $12? Personally, I wouldn't bat an eye. I'd be like, this is great service. I love Spotify. I and if they increase their prices, I would feel like, hey, it's still worth it. It's great, and I'm not canceling. And you notice I gave you this example where they raise a dollar or two, and sometimes that's all you have to do. You don't have to drastically raise your prices. If your online community or software product is $45 a month, bringing it up to $49 a month is a huge difference for your bottom line. But for the customer side, it's not really that bad. 45 and 49 kind of lives in the same place in your head, but $4 makes a huge difference for you. Say, for example, you have 2,000 people in your community. It's not a humongous community, but it's a substantial size. And if they're paying monthly 49 instead of 45, that's an additional $8,000 a month for you in terms of revenue. Now, couldn't you use $8,000 extra every month to market your business, to innovate, to make a critical hire, or heck, keep it in the bank for a rainy day? You get the point. A slight increase in price makes a world of a difference for a business. So that's my first tip when it comes to when to raise prices when you need to. If things are really tight right now in your business, if your profit margins are really slim, raising prices is the easiest thing to do. It's the fastest thing to do to get out of that jam. And again, you don't have to raise prices drastically. Number two, when you actually raise Prices, you have a couple options. One, you can grandfather people that exist right now as a member. Now, if you don't have a reoccurring model, this doesn't really apply. So you don't have to worry about it. So if somebody's paying $45 a month in this example, you can lock in that price as long as they're a member. But anybody new should pay the higher price, the new price. Now, if you don't have a reoccurring membership where you have a one off product, whether it's a course or a T shirt or whatever, then you then raising prices is not that difficult. Every purchase is a new purchase. When else is a good time to raise prices? Well, when you overhaul or improve your experience, if you release a new update to your software, if you release a whole bunch of new courses in your community, even if you improve the experience on your website or the way you deliver your products or service, that's a good reason to raise prices. And hey, before you raise prices, you could tell your customers or tell your potential customers on your email list, hey, we're about to raise prices because we just did a whole rehaul to our website or we improved our actual product or our software. And before we raise prices, now's your chance to grab it at the low price. So an improvement and update is a great time to time your raising of prices. When else is a good time to raise prices? Well, when your costs go up, sometimes you don't have a choice. Let's say for example, you run a cafe and one of your most popular items are your fresh juices. But hey, the state or the city or the country you're in isn't a drought. So your produce prices are going to be more expensive, meaning the supplies you need to create those juices. So increasing the price of your juices is kind of a must do because your costs are so high, you don't want to operate at a loss even at the item level. So raising that price a little bit so you can be profitable might be something you just have to do because of the circumstance. And hey, you can even communicate that to your customers on that chalkboard. You can say juices have increased a dollar because of the drought. Blame mother Nature, right? So you can make a joke of it, but the point is you can explain why the price went up. And hey, if the juice is a dollar more and they see, hey, you got to be profitable and it's because of the drought, it's not because you're trying to be Nasty or, or greedy. Your customers, especially your loyal customers, will understand. When else is a good time to raise prices? Well, some people raise prices because it's time. They actually set a schedule when to raise prices. And this is because they want to find out at what price point are they the most profitable. And the only way to do that is to push the limits. So say, for example, you have a product for $20, then you raise the price to $25 three months later. And now another three months later you raise it to $30 and another three months after that to $33. The point here is that the business owner is raising the price incrementally because they want to see how many sales they make at that price because their overall profit, it's really what they're looking for. Or they really want to know which price point is the most profitable. So you might think, of course 30 is better than 25. Well, not necessarily. It's. It depends on how many sales they get from each. So if at the $30 mark, and considering everything else is equal, they make 30 sales, so that's $900. But if they made 50 sales at the 25 mark, that's 1,250. So they're making $350 extra in profit at the $25 mark. So they kind of broke that ceiling just so they can see how far they need to go to be not as profitable. At that point, they can move the price at 25 for the time being. And that's really what a lot of people do to test the right price to start somewhere, maybe in the lowish area and slowly increase the price and see how profitable they are on each price point. And it's just like clockwork. Every three months or every four months or every six months. You can choose. You know, I would say that it depends on your traffic. So you have enough sample size, meaning you're getting enough traffic to your business or to your website so you can have enough sales to say, okay, this is a healthy number of people to say, okay, this is the right price point. So raising prices can be a science, it could be an experiment, and it can just be a part of what you do in business. When is another time that raising prices makes complete sense is a good time. We talked about inflation, but also currency crashes. This is more and more common these days. If you live in Australia, for example, and your website, your business accepts Australian dollars. Power of the Australian dollar was much stronger five years ago. US$1 used to get you about US$0.75 in Australian. Now, US$1 gets you about $1.30 Australian. So this is critically important, especially if your costs come from US dollars, meaning that if you're paying for your costs in dollars, but you're collecting in Australian dollars, you're actually making sales in Australian dollars or whatever currency. And there's a currency crash or a difference in currency that has happened over years. You need to rectify that with a raise of price. You got to revisit your prices because what you're paying for, what you have to pay for, is getting more expensive versus what you're actually making. The power of the dollar you're actually making doesn't have as much power as before. I got more when it comes to when to raise prices. But before that, let me give love to today's sponsor. Support for today's show comes from Microsoft Teams. Microsoft Teams is your hub for teamwork in Office 365. Here at the $100 MBA, we run a remote team, so we have teammates all across the world. And sometimes communicating can be quite hectic. Organizing everything from chats and emails and files, it can get chaotic. With so much to look after, it would be great just to have everything in one place. And that's what Microsoft Teams does. Teams is a single workplace where you can work, share and connect with the people in your work life. Teams brings together chat, meetings, files and apps all in one place. Take Teamwork, where you work with apps for mobile and desktop. So whether you're sprinting towards a deadline or sharing your next big idea, Teams can help you and your team achieve more. I recently used Teams and I found the user experience to be so simple and clean. I found it like stress reducing. So I tip my hat to Microsoft Teams for building such a easy to use app. Microsoft Teams in Office365 visit office.comteams to learn more. I know that when you have to raise prices, it's a bit uncomfortable. You don't want to disappoint your customers. Totally get it. So my advice is always to communicate as much as possible when this happens, even if it doesn't affect the customers you have already. So say for example, you're grandfathering them in, they're going to keep their old pricing, communicate that to them because they might go to your pricing page and see a higher price and say, hey, am I being charged that price, that new higher price? And even if they're not and they find out that they're not, with an email to you, they're going to feel like, oh, I wish they told me I was a little bit skeptical for a while. So communicate, communicate. Communicate as much as possible and communicate more than once mention the change of prices, even if it doesn't affect them. If it affects them, of course you have to communicate that, but do that several times. Several emails. If you have in app messages or in community messages or message board or a Facebook group, make sure you communicate that. Some Companies even have SMS's that go out so you can send them an SMS letting them know what's going on. People will appreciate the transparency. All right, that wraps up today's lesson. Thank you so much for listening to the $100 NBA show. This episode is not over though, because it's free Free ride Friday. I gotta say, who won this week's free ride to ezcourse, our 30 day course on how to build an online course over at easycourse Co. And the winner is. Nate Rumble. Nate Rumble says great podcast. Five stars. This podcast is the real deal. Great info and nice digestible bites that make a big difference. Love every episode. Well, thanks Nate for that awesome reading and review on itunes. Hey, if you want to win a free ride just like Nate just did, all you gotta do is leave us an itunes rating and review and you enter our weekly random draw every week until you win. Nate, your mission is to email me@omar mba.net so we can hook you up with the free ride to EZ course. Thank you so much everybody for listening, for subscribing, for being a part of our community here on the podcast. If you haven't subscribed yet to the podcast, whether you're listening on itunes or stitcher or overcaster or whatever, Apple do that now. You don't want to miss an episode. This Monday we have a very special guest teacher episode, Jordan Harbinger from the Jordan Harbinger Show. Jordan is an expert when it comes to building solid relationships in life and in business. He's going to be teaching you how to build relationships for a rainy day. How to build them now so when you need them, they're there for you. That's coming up in our next episode on Monday. Alright, before I go, I want to leave you with this. If you're in this tough spot where you're not making a profit, you need to raise prices now. You gotta be profitable and raising your prices slightly is not gonna make a big difference for your customers. You can even again communicate it to them, say, hey, we're not as profitable as we need to be, so we can be sustainable. So we can continue to serve you and be there for you. So we gotta raise our prices just a bit. They'll love you for it, and they'll be happy to even pay you that extra money, knowing that they're supporting you and what you do in the business. All right, that wraps up today's episode. I'll check you Monday with our guest teacher episode from Jordan Harbinger. Until then, take care.