Introduction

We recently started working with an agency who’d not raised their prices in 10 years. Imagine that, a decade without a price increase, meaning their margins were slipping away without them realising it.

Not adjusting your prices can lead to a slow but steady decline in your profit margins, especially with inflation levels as high as they are today. Your staff costs and supplier costs are constantly on the rise so to remain profitable you need to regularly review and update your pricing.

Reducing profit margins will have a knock-on effect on your cash flow too. For your cashflow and margins to stay in good health you’re going to have to look beyond the now and make a habit of reviewing your prices regularly – annually at the very least. 

And our client isn’t unique. Lots of agencies don’t increase their prices nearly enough, and it’s an oversight that quietly eats away at their profits.

When was the last time you reviewed your prices? 

What do you need to consider?

Market Rates

There are a few different factors you should consider when reviewing your prices. The first is the market rates. You’ve got to know what’s going on out there to stay competitive. But here is the thing – don’t let this be the sole determinant of your prices! You shouldn’t be afraid to charge more if you’re delivering outstanding service above and beyond what your competitors offer. You need to make sure you’re paid for the value you bring to your clients.

The Client Side of Things

Understanding what your clients expect and value is a must. Communication is key – When it’s time to put up your prices, make sure your clients get why; Explain the value in what you offer and why it’s worth the extra. (We’ve got more on navigating price increases with customers in our blog on value pricing.

Supplier Costs

As we’ve mentioned, in these uncertain economic times, your costs are constantly on the rise – suppliers, salaries, overheads – you name it, everyone is raising their prices and it adds up! Even if it doesn’t seem like a big deal in the moment, over time these increases will significantly eat away at your profits unless you act.  Time is money in agencies – think about your price reviews as a chance to see if the hours you’re putting in match up with what you are charging. 

In a nutshell

The bottom line is those price reviews are like your company’s annual health check – keeping things fair, transparent and making sure your prices reflect the value you offer. They may be the secret recipe you need to not only keep your profit margins and cashflow healthy, but also to building a stronger client relationship based on open communication, honesty and value for what your clients are paying.