Episode 124: Inflation Hurting Your Bottom Line? Here's How To Adjust Your Pricing!
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Business owner, are you dealing with a massive rise in costs of supplies and goods? Is it leaving you looking at current contracts, budgets, and amounts wondering how your business is going to survive?
Maybe you've routinely practiced in your mind how you would tell your clients that the price has to increase... Only to immediately shy away from the conversation because you're not sure how to legally adjust pricing. Here's the thing inflation is predictable. It happens year after year, and as a business owner should be upping your packages and prices to reflect that.
But what many, many, many service providers are dealing with right now is the unforeseen massive spikes in cost of goods due to inflation, political happenings around the world. Which have been impacting cost beyond our control. We're also still dealing with COVID reschedules from 2020 and 2021, and those clients probably had your old 2019 or early 2020 pricing. So what's a business owner to do right now in our current situation? In this episode, I'm going to break down what clause you need to add to your contract, and how to correctly modify your existing contracts through addendums.
Episode Highlights
- The clause you need to add to your contracts to help reflect current inflation that is costing your business.
- How to communicate this clause with your current clients through addendums, and putting customer service first and top of mind.
- How to adequately prepare for the increase in cost of goods and how, and when you should impute costs on your client or bear the cost yourself.
- Why at TLP we suggest not increasing the amount you charge for travel in contracts, but mainly increasing amounts surrounding wholesale goods.
Worth Noting
"I want you to have a clause in your contract on the ability to adjust pricing for customers. You need to be clear that you will only adjust pricing on costs of goods, not on gas, not on incidentals, so on and so forth. I hope you're catching my drift here. Be very clear in this clause and language in your contract. Be clear that you will notify them of changes to their original price quoted at least, 30 days in advance, 60 days in advance, etc. So that you can adequately place your order for the goods in advance, and so that your clients have the right to make modifications to their order." - Paige's advice on adjusting pricing on costs of goods in contracts.
"The US inflation rate right now has accelerated to 7.58%, which is the highest since 1982. That's something you could say to your clients. If they're rescheduled clients, inform them of other pricing adjustments you've made to your packages and that they've not been charged for those. Explaing how
clients who booked you at the end of 2020 into 2021, we're charged this amount so that they can see your just up-charging them a little bit. But that they are still getting a great deal compared to other clients that have booked recently." - Paige's advice explaining to current clients your reasoning for having to increase certain prices within the contract.
"Be ready for your client to say no and be okay with that answer. As a party to the original contract, you have to realize that your client has a right to say no to future changes. But, also that if your client has the right to say no, then you can cancel the contract yourself."- Paige's advice on providing customer service first, but understanding either party can say no.
TLP Resources:
- Purchase the TLP Adjusting Price Clause
- Purchase TLP's Contract Addendum & Amendments for General Purposes
- Become a TLP Insider
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