Price increases are an inevitable part of running an organisation. It goes without saying that the fees you charge need to cover your outgoings and expenses, all of which can potentially rise at any point. And with the cost of living hitting many, it’s inevitable at some point your prices may need to increase. Therefore, having the ability to cope with price hikes is an important part of your organisation’s management.
In this article, we share some advice to help you successfully manage price increases and the communication to those affected.
Identifying the need to raise prices
Running costs, expenses, refurbishments and equipment, significant outlays… the list of demands on your organisation’s finances can sometimes seem endless.
The perfect scenario would be to have enough people paying to cover all your organisation’s outgoings, with a healthy buffer to keep you afloat. But what if that pool of people decreases slightly, or your outgoings increase?
In an ideal world, we would be able to anticipate price rises before they have an impact on finances. However, sound accounting and a firm grip on spending and income will help you identify potential shortfalls in funding before they happen – or before they have a significant impact. Learn more about LoveAdmin’s functionality.
Your database system should help you track your fee collections and reconcile them with your accounts. LoveAdmin goes one step further though and forecasts your income too – calculating future income based on peoples’ financial commitments. For example, monthly fees, recurring donations and instalment payments.
Of course, the difficulty can be identifying the shortfall you are facing and how to tell people the fees are going up.
Calculating the rise
It’s important to note that raising your fees merely to increase your revenue is never best practice.
The need to increase fees should always come in conjunction with the need to meet a set goal. Keeping fees at a level customers are happy with should always be the top priority. And this should go hand in hand with the objective of increasing numbers.
Calculating rises could be down to many factors, but the three most common are:
- To support price increases in running costs, services and offerings – this can include utilities, volunteer expenses, insurance, licenses or administration, etc. Rising running costs should be anticipated well in advance, and many service providers, such as utility companies, will inform you of price rises with plenty of notice. Anticipated cost rises can be calculated using historical data, and fee rises can be applied in advance.
- To help support the growth of the organisation – investment in new equipment, buildings and marketing can all have an impact on your finances. If major investment is required, then the shortfall should be calculated and the fees raised accordingly. Further fundraising efforts may be required to ensure you hit your target, though.
- As part of a regular annual increase – this is the best way to head off a shortfall in your finances ahead of predicted rises in running costs. It is probably the easiest way to raise prices without upsetting your customers.
Price rises are often better received when they are small, regular rises, rather than large, infrequent rises. So, think long-term with your pricing strategy. A 5% increase each year is much more manageable than raising the prices of your service by 20% every 3-4 years.
Communicating the price increase
You have a couple of options when it comes to informing customers of fee increases:
- Through renewal notices that can be automatically sent via your admin management software
- Through mass communication, such as email, newsletter or a notice displayed in your organisation’s building or on your website
If your price increase is not due to regular/annual increases, then you should consider offering justification for the rise.
But if you are happy that people see the value in what your organisation offers, then you may feel justifying the rise is not necessary. In this case, mentioning the increase alone will suffice.
Planning future price rises
We touched on future-proofing price rises earlier on, but the importance of forecasting cannot be stressed enough. If customers expect price increases, they will be more amenable to paying them. What you need to ensure is that people continue to consider your organisation’s offering as a real value for their fees.
How you manage price increases can be integral to the future growth of your organisation – get it wrong and you could see people starting to leave. Get it right, however, and you will continue to keep your organisation comfortably afloat.
With LoveAdmin, people can pre-authorise future payments. That means if there is an increase in fees, you can still collect what’s due automatically.
To learn more about LoveAdmin and how we can help you manage your financials and potential price increases, contact us or get a FREE demo.
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