Businesses are in business to make money. That’s an obvious statement, but one which business owners need to remind themselves of from time to time.

In essence, there are only a few ways a business can increase its profit: increase sales, cut costs, and/or raise prices. The last – raising prices, whether the business sells a product or service or both, is perhaps the most difficult to do.

Why?

Because, as stated before, even though businesses are in business to make money, customers don’t necessarily see it that way. They become accustomed to paying a certain price for something, and that’s that. Factors influencing a business’s decision to increase prices – no matter the size of the business – include inflation, an increase in the cost of doing business (fuel, insurance, vendor price increases, etc.), or an increase in the price competitors charge. While these are all valid, legitimate reasons to increase prices, they are all beyond the customer’s control. Therefore, they may well feel the increase in price is unjustified – especially if there is no change in the product or service they’re currently receiving.

So, how does a business go about raising prices, which is an inevitable part of doing business, in a way that is most palatable to customers?

Timely, courteous communication is the key.

After a business has made the decision to increase prices, the owner or manager should make a list of its top customers. Each should be contacted by phone, or in person to inform them of the price increase.

In today’s electronic age, it may well be tempting to inform customers of a price increase via email, especially because the subject matter may be a bit uncomfortable, but it’s necessary and actually strategic, to do it verbally.

If you’re calling a customer, during the conversation, diplomacy and kindness are your watchwords. Write down the reasons prices are being increased, and keep the list in front of you. Remember to listen. Listen to your customer’s complaints, or comments, whatever they may be. If a customer is upset, listening goes a long way in diffusing the situation. If you’re speaking with a customer in person, make sure you allot time to talk with the customer; don’t ‘chuck and duck’. And, you may even end up earning increased loyalty this way, because customers will remember you took the time to contact them in a personal way.

Also, remember it’s only courteous to inform customers of the price increase well in advance – a month or two is acceptable.

It’s also advisable to send an email following phone and/or face to face conversations that details the price increase, and when it’s to go in to effect. Remember to include an invitation to discuss any questions or concerns they may have. Showing your customers you value their input will go a long way in ‘selling’ the increase.

Before you make the decision to increase prices, do thorough research. Because it can be a difficult process, you want to be sure you don’t have to raise prices again in the near future. Not only will it make you look unprofessional, your customers may lose confidence in your judgment.

One of the upsides of raising prices, besides increased revenue, is that it may take your business to the next level. Working to be a leader in your field of expertise goes without saying, and if your business has been doing so diligently, and as a result of your careful research, you may find yourself in the position of cultivating relationships with more affluent customers who are willing to pay your increased prices and have no problem doing so.

However, despite your best efforts, you will probably lose a few customers. Unfortunately, this is one of the costs of doing business. Taking a proactive, courteous approach to communicating with your customers is the most effective way of minimizing the loss, and for helping you win future business.