How Do You Raise Prices?

10/5/22 Update: In July 2021, our business model changed to commercial cleaning. The C3 Experience does have bonding, contracts, and automatic annual increases of 3%.

Original Article: I love answering questions about my cleaning business and the industry in general. This question is an important one! I've been a business owner for nearly 20 years and a consumer for over 30. I completely understand the need for price increases, but there is a right and wrong way to do it. I've noticed 5 methods over the years as a consumer and business owner.

They don't raise prices! I won't spend much time here. If businesses attempt to keep their prices the same as everything else around them increases, they will eventually go out of business. I've seen this in my industry where smaller cleaning companies keep their prices the same for a decade. As a result, they have to take on more and more clients each year to make the same profit. These cleaners get frustrated with their business or feel like they can't keep up. Quality usually suffers and the business relationship ends at some point due to diminished quality or lack of profits. This is not good for the cleaner or the homeowner. I DO raise prices!

They raise prices without notifying their customers the WRONG way! I get irritated when companies that I do business with on a regular basis raise my prices without telling me ahead of time. Utility and insurance companies are notorious for this! Have you ever received a bill and realized the price was $10 higher for months? It was only $10, so you didn't care to fix it. A year later, the same bill was $20 higher. Can you relate? The examples I just cited are all service-based businesses supplying a service on a recurring basis. You don't pay once per year, rather once per month. I don't like it when this happens and neither do you! I never do this in my cleaning business!

They raise prices without notifying their customers the RIGHT way! There is another type of business that raises prices without notifying their customers. Restaurants, clothing stores, grocery stores, and gas stations are great examples. These are 1-time transactional retail sales businesses. A clothing store doesn't need to tell people they are raising their prices. They just do and customers choose whether to shop there based on their level of supply, customer service, convenience, and price. The prices of the grocery store, gas station, convenience store, and restaurant rely upon the prices of the cost of their goods sold. A great example is the pizza shop. I remember asking the owner of a delicious pizza shop near my house why the price went up. They told me that pizza prices are most affected by the price of cheese and they have no control over that. It made perfect sense to me. These retail businesses aim to maintain a target profit margin. As their cost of goods sold increases, they are forced to increase prices. We, as consumers, understand and accept this. Cleaning businesses are not retail. However, many of us take on 1-time cleaning projects like real estate, post-construction, window, and carpet cleaning. You may be a realtor and hire a cleaner to help you sell a house. If you just used the cleaner, their prices are likely to be the same. If you haven't hired a specific cleaner in 3 years, their prices are probably higher because they picked up certifications, added expenses, or acquired specialized knowledge. You should expect this with any strong company. My cleaning business is no different. My 1-time Real Estate Presentation and window cleaning services do increase from year to year. I don't notify my customers and I don't need to.

They raise prices and notify customers ahead of time once!  In my industry, there are two schools of thought. One school is to on-board clients with their full policy and one of these policies states they will raise prices each year on the anniversary date. These increases are typically between $3 - $8 per year. They don't notify the customers ahead of each annual increase. It's stated in the New Client Agreement that they had to sign, therefore the customer is notified ahead of time... in a way. I don't do this!

They raise prices and notify customers ahead of time! A good example of the second school of price increase is my old disposal company. They sent out a letter every 2 years notifying us of the price increase and its effective start date. I didn't like the increase, but I appreciated the level of customer service and respect. I have used the same school for years. Typically, I increase my prices every 3 years to my recurring house and office clients to help customers keep a budget around cleaning for multiple years. My last increase was in 2017 and I was due in 2020 for another. However, I chose NOT to increase prices last year due to COVID-19 and the effect it had on families, businesses, and finances. Therefore, I'll be raising prices in 2021 on a case-by-case basis. My newest clients usually get a pass until the next price increase. Some clients get more of a price increase than others and some new clients get increases. WHY WOULD YOU DO THIS KEN? The answer is simple. I track my times and profits for my whole business and each customer. I may have underpriced the customer or the scope of work may have increased. Therefore, I MUST increase those more than others. It's business and nothing personal! Once I decide on the price increases or passes for each client, I write formal letters. These letters explain the reasons for the price increase or the pass. I provide the new price for the same service AND a second option with reduced scope of work for the current price. Lastly, I give a 45-day implementation window. I've done this four times in my 16 years. The great majority of my clients expressed gratitude for keeping their prices the same for so long, giving them options, plenty of time, and for the explanation. Some have canceled service as a result and that's alright. I don't like losing clients, but again, it's not personal! I'm operating a service business to the best of my ability.
 
I've never answered this question publicly before. It feels good to be this transparent about how I conduct my business behind the scenes.