Jan 15, 2019

When Inflation Drives You to Increase Your Rates

When Inflation Drives You to Increase Your Rates

Setting prices in your shop for parts and labor also sets the stage for success or failure. Charge too much, and customers will go elsewhere. On the other hand, charging too little keeps your shop from making a profit. Even once you’ve found that sweet spot, you can’t set up camp and live there forever. Inflation affects the price of doing business. Over the past 10 years, for instance, prices have gone up more than 16 percent. It didn’t all happen at once. Instead, it’s gone up slowly at a rate of about 1.55 percent per year. Still, the constant rise means you’ll have to adjust your pricing at some point. Periodic inflation driven rate increases are necessary to ensure your shop’s doors stay open.

Raising Your Prices

If you haven’t upped your prices in years—or ever—the first hike could be the hardest to implement. Customers are used to paying what you’ve been charging for years. They won’t happily take to paying more for the same products and service. The first time around, you may need to figure out an ideal increase, but put only a percentage of it into effect. Calculate how much of the total will get you by for 1 to 2 years, remembering that inflation will continue during that time, too. Then, maybe around the 18 month-mark, carry out Phase 2 of the price increase to get your shop where it needs to be.

After that, inflation driven rate increases will be easier to execute. You’ll have the benefit of historical data to help you determine the amount and frequency of future price adjustments. Your gut feeling to keep control over rate hikes and keep them to a minimum is spot-on. Experts advise not raising rates more often than every couple of years to maintain customer confidence while staying profitable.

Carrying Out Inflation Driven Rate Increases

Putting inflation driven rate increases into effect isn’t as simple as changing the prices on your website and your shop’s price board. And, you definitely can’t let customers find out on an invoice. First, you should honor estimates that used old pricing, especially if the work was started or at least scheduled before the new prices took effect. As for making customers aware of inflation driven rate increases, the professional thing to do is to give customers notice. That allows them time to make budgetary changes on their end if needed. You can present new pricing in mailed brochures or even in an email. If you choose the email option, be sure to use the receipt confirmation feature so you can follow up with those who didn’t get the email.

It’s also good business to contact your 10 to 20 best clients in person. That shows them you value their business and gives you the chance to explain what’s behind the rise in prices. Present your position confidently and don’t be apologetic. Most of your customers are likely business people, too, and understand how inflation affects costs. If your competitors’ prices are more than yours even after an increase, use that info to your advantage. You can even offer to meet or beat rival shops’ pricing to show top clients you’re willing to deal to keep them as customers.

Get Help Figuring and Implementing Rate Hikes

Heavy-duty repair shop software like Fullbay helps make prices changes as straight-forward as possible. For starters, it tracks all the analytics of your business and puts that data at your disposal anytime you need it. Your parts pricing matrix and labor rates are programmed in, so increases happen easily just by making a few adjustments to base figures. What’s more, because it also keeps histories on all customers’ PMs and repairs, it’s an awesome CRM tool you can use for helping customers understand the value of the products and services you provide. That helps ease them into price hikes when inflation driven rate increases happen.

And that’s just the beginning of the benefits of using Fullbay software. Fill in the form below to take a test drive and see all the ways Fullbay can help make running a shop easier.