I have a great job. I’m the in-house CPA for a group of medical office buildings.
We have a tiny staff, so part of our culture is that nothing is below anyone’s pay grade. Our motto is, “Everybody does whatever the @#$% it takes to get $#!+ done.” Because of that I’m not just an accountant. From time to time I’m also a snow plow driver, landscaper, bouncer, toilet unclogger and self-storage facility manager.
When our buildings were built back in 2005, the developers decided to build out a full basement and use it as a self-storage facility. I started in 2009. We put in the units in 2011, and ever since then I’ve been the manager of a 67-unit self-storage facility.
Due to my amazing managerial skills, we got to the point where we were completely full with a waiting list — which I thought was awesome, and I figured it’d totally impress the developers.
It did not. In fact it kind of pissed them off because a waiting list means that our prices are too low. It also means I’m an idiot because I knew that.
To put this in perspective, the storage facility is a very small part of our business, so failing to maximize its revenue wasn’t a cardinal sin. But think about your firm. Do you have to turn clients away because you don’t have the capacity to take care of them? Then your prices are too low. Or do you know you’re burning out your people during busy season? You’re giving them too much work because you have too much work because your prices are too low.
After a quick Google search to determine market rates, I was instructed to raise my prices by 50 percent. That means that a storage unit that rented for $100 per month now costs $150 per month. And that scared the crap out of me.
But here’s what happened. I went from 100 percent full to 85 percent full, and even though I lost fifteen percent of my customers, our revenue increased $996 per month. And I haven’t yet gone through my waiting list to fill vacancy.
And we’re not stupid. We know that’s what is going to happen when we raise our prices: we won’t be as busy AND we will make more money.
But here’s the thing I eventually realized: I wasn’t really scared of losing customers. I was scared that my customers would think I’m an asshole.
Most people balk when confronted with the need to raise their prices, and they say they’re afraid of losing business. That’s an easy way to protect yourself from the more vulnerable truth that you’re afraid that people are going to get pissed and resentful and not like you. Psychology teaches us that reputation and acceptance are incredibly valuable to us humans, so before you raise your prices, you need to have a plan for how to navigate this.
I hadn’t raised my prices in four years. That’s part of why I had to jack them up so high. If instead I had raised my prices 12 to 13 percent every year, then they would have had an easier time adjusting to the cumulative effect, and it wouldn’t have been so jarring. So regular, smaller price increases will make you more confident than huge sporadic increases.
The other thing that helped me was I had a sweet scapegoat. I was able to tell my customers that the developers were forcing me to raise my prices. That let me maintain my position as the good cop, and the faceless, nameless owners of the facility got to be the bad cop. You can use a similar approach, using the talent pool as a scapegoat. “We have amazing people. That’s why we can take such great care of you. If I burn them out and/or don’t pay them enough, they won’t stick around. And there are innumerable firms who would gladly poach them from me. So I need to raise prices to continue to serve you properly.”
Here’s another reality check: it takes time and effort to raise your prices. There’s a ton of communication and a lot of administrative work to get it done. So make sure you’re prepared for that.
But here’s another benefit. I had existing customers who wanted more space in my storage facility, but I couldn’t give it to them. Losing the fifteen percent freed up capacity to serve some fantastic customers even better than before. The same thing should happen with you at your firm.
So in summary, raise your damn prices.
Greg was born in Akron, Ohio, in the shadow of the Firestone tire factory. He began to swim competitively when he was eight, swimming for the Mountlake Terrace Lemmings. He graduated in 1995 from the University of Washington with a math degree. He chose math for the ladies. After serving ten-years as an 8th grade math teacher, he decided it was time for a career change, mainly because he “couldn’t stand those little bastards.” He began his accounting career with a local CPA firm in Orem, Utah, where he consistently failed the QuickBooks ProAdvisor advanced certification exam. Greg currently works as the Controller for the Utah Valley Physicians Plaza. He lives in Utah, but manages to make it to Greenville, SC once a year to emcee Deeper Weekend. He enjoys eating maple bars, drinking Diet Pepsi, and swearing.