People often start a business to pursue a passion and to have more control over their lives. Unfortunately, the business often ends up taking control instead. The owner has less time with family, rather than more, and even when not at work, work is always present. The passion fades, the owner feels stuck, but doubles down and works even harder because business is not supposed to be easy, right? What to do?
Here’s some advice that may seem counterintuitive. RAISE YOUR PRICES.
But if you raise prices, you might lose customers, right? That’s certainly possible, and possibly certain, depending on how much you raise them and how you communicate with your customers. Which customers are most likely to leave? The ones who value what you provide the least. The ones who are probably the biggest pain to work with now. If they leave, and you make more money serving the customers who really value what you do, you can spend more time and energy focusing where it matters, to both you and your customers.
What’s better: working 100% of the time for $100 per hour, or working 50% of the time for $200 per hour? Most people would say they’d rather work less and make the same money. Yet many business owners focus on the amount of work, rather than the amount of profit. (Or course, businesses have to cover their costs, and especially in high fixed cost contexts, you may need a lot of volume to make the numbers work.)
You don’t have to double your prices (although I recommend thinking of ways to do it, and at least giving customers the option– you may be surprised at what happens), but even modest increases can do wonders for your bottom line. If you are currently making 20% margins in a high variable cost business like services, raising prices 10% will almost double your profit if you keep volume the same. If you lose 20% of your volume, you still make almost 20% more profit. And you did while working less. So the work that you do, for customers who care, becomes fun again. And you can take that extra time, energy and money, and invest it back in your business, your family, and yourself.