How and Why to Raise Prices in a Down Economy

business Jun 12, 2024

Setting prices is one of the most challenging parts of running a business. Many entrepreneurs struggle with setting their rates, especially those whose businesses are in the fitness or wellness industries.

You started your business to help people feel better and lead healthier lives. So how can you justify raising your prices when doing so could make your services too expensive for some people?

It’s a question that most entrepreneurs face occasionally. But the decision can be even more challenging during a tough economy. Let’s look at some of the most important factors to consider when deciding whether to raise prices in your business.

How costs impact your prices

Keeping your business profitable is all about balancing your income and expenses. When your expenses increase, you need to raise your prices accordingly. If you don’t maintain profitability, you’ll eventually have to close your doors!

Most business owners are seeing increased expenses due to inflation and other economic factors. Equipment costs more, studio rental rates are going up, and team members are looking for higher salaries. And don’t forget about other rising expenses like utilities and insurance.

It can be difficult to raise prices when you know that the economy is tough on your clients as well. You might feel like you’re being greedy changing more money for services that support your clients’ health. Or maybe you’re worried that you’ll lose some clients who aren’t able to afford your services any longer.

It’s normal to experience those concerns. But it’s crucial to look at the big picture. If you don’t raise your prices to maintain profitability, you’ll eventually have to close your doors. And then you can’t employ your team members or offer your services to your clients. 

In other words, raising your prices to maintain profitability doesn’t just benefit you. It allows your business to stay afloat so it can continue to provide for your team and your clients.

Pricing tip #1: Focus on value

Are you worried that your clients will leave if you raise your rates? It’s a natural concern, but you can’t let it impact your pricing decisions. 

If your costs are rising, you must raise your rates to maintain profitability. Monitor your financials so that you know when it’s time to update your prices. 

Once you’ve decided to raise your rates, how should you tell your clients? Here are some tips:

  • Frame it correctly: Use neutral language, like “pricing update” instead of “price increase,” which has a negative connotation.
  • Highlight the value: Separate your value proposition from your pricing. Showcase all the benefits your clients get by investing in your services: individual attention, customized fitness plans, a positive studio environment, or whatever makes your business stand out from your competition.
  • Address your clients’ needs: When the economy is tough for your clients, look for ways to adapt your services to fit their needs. For example, you could offer a shorter class that your clients could attend during their lunch break. 

Remind your clients about the value they receive when they choose to work with you. And if you’re having a hard time thinking about the value you’re providing, take a minute to evaluate your mindset — it might be holding you back!

Pricing tip #2: Highlight expertise and results

It’s easy to get caught up in the mechanics of pricing — the idea that your clients are simply exchanging their money for your time. But pricing is far more nuanced than that.

For example, your clients aren’t just paying for 60 minutes of Pilates in your studio. They’re paying for access to the equipment and your expertise. They’re paying for the chance to do something that benefits their overall well-being. 

They’re trading some of their tangible financial resources for intangible benefits, like better health. If you can talk about pricing in terms of results (especially long-term results), it can help you and your clients feel better about higher rates. 

Pricing tip #3: Make a strategic announcement

Now that you’ve decided to raise your prices, how should you announce it to your clients? It’s easier to announce a pricing update during a natural transition. 

For example, you might want to update your pricing at the beginning of the year. Another good time is the beginning of September when people are starting to get back into their standard routine after summer break. 

It doesn’t have to be a specific time of the year. Another approach is to combine price updates with other changes to your studio. 

Maybe you’re going to run a month-long exercise challenge. Or you’re adding a new 75-minute massage option as a middle ground between 50 and 90 minutes. Maybe you’re just doing a soft rebrand for your studio. These are also good times to update your pricing.

No matter when you decide to make the change, ensure that you give your clients enough notice. Between 30 and 60 days is usually a good rule of thumb — that way, your clients won’t feel like the new pricing is a surprise. 

Raising your prices doesn’t have to be a crisis

It’s easy to get caught up in the idea that your clients will be upset or leave if you raise your prices. But the truth is that most people will simply accept updated pricing. Yes, you might have a couple of clients raise objections or leave, but most people understand that inflation impacts prices for businesses of all sizes. 

So when your accounting numbers make it clear that you need to increase your prices to remain profitable, don’t stress. It’s a normal part of running a business, and updating your prices gets easier with practice. Most of your clients will simply accept the new prices, especially if you remind them of the value you provide and give them advance notice of the rate changes.

If you’re still not sure whether you should raise prices or how to do it strategically, I’d love to help! Book a 1:1 coaching call with me to discuss your finances and pricing strategies. Schedule your call today!