As the Veteran CPA and someone who works with many small business owners in service industries such as home remodeling, lawn care services, heating & air, etc. this often becomes the most important message a business owner needs to hear:
We strongly recommend raising your prices 10% to 20% so that your business can turn a profit. Here are a few ways of looking at it:
- If some new clients or existing clients are not saying you are too expensive, you are not charging high enough.
- You must make a profit. The IRS forces you to make a profit. The IRS audits businesses that show losses with high sales and don’t pay any taxes. It’s best to show some profit and pay taxes to keep the IRS off your back.
- You are valuable and work hard, so each week you want to have a profit that can pay all your bills and be able to save some for retirement.
- People are selfish when it comes to money, but you have to take care of yourself. Trust me, I know how hard it is. As business owners, if we have 85% happy clients and 15% are complaining about our prices, that means our business is doing well.
- If we have 100% happy clients and 0% of clients are complaining about our prices, that means our business is not profitable and we are throwing ourselves under the bus.
- Get rid of any current clients that are not profitable or causing too much stress.
With each new sale, try 15% – 20% higher prices than what you are charging now. You are allowed to change your prices up and down based on the current demand. In the worst case scenario, 3-4 new clients in a row don’t accept your new higher fees, you can always go back to the fees you are charging now. If this happens, look for ways to lower your business expenses.
I hope that helps!
At Your Service,
Josh Simpson, The Veteran CPA