This transcript was generated from the episode audio and may contain minor errors.
[Music]
I often encourage small business owners who are feeling overwhelmed. They have too many inquiries coming in. They feel like they can't keep up with all the business, especially when they're also working a day job and doing a bunch of other stuff. I often encourage them to consider a simple action that might help, which is to raise your prices. Also as a side benefit when you raise your prices, you're gonna make more money.
Crazy how that works. I actually got an email from my therapist recently. She was explaining that she was raising her rates. And in that email, she explained, she'd actually raised her rates like a year ago for new clients. And she was now getting around to making her rates consistent for everybody.
And I was like, "Hey, good for you." That's how it works. Like you should do that. So last week I was also watching a video from Chase Jarvis, a good friend of mine. He's the co-founder of Creative Live, among other things. And he went even further with this.
He was like, he had a photographer who called into his show and said, "I'm fully booked. "I don't know what to do. "I have to keep turning away business." And Chase said, "Raise your rates 10 times." 10X, I was like, whoa, hardcore. Can you really raise your prices that much? 10X or some other very high level.
That's what today's caller wants to know. Presumably there is a price ceiling somewhere, but how high is too high? How do you know? How do you figure it out? What if you price something so high that no one buys it?
The detailed question and my answer is coming right up. [Music]
Hi Chris, this is Sean from LA and I recently found your show. I've learned that when it comes to pricing, too high might be better than too low, which seems counterintuitive, but several examples on the show have helped me to rethink the whole concept. Still, it's clear that there's a price ceiling somewhere, right? Like if my service business was getting busy and I wanted to slow down, I could raise my rates, which would likely result in some of my clients going away.
But I couldn't raise them infinitely because then I'd lose all of them. What if I priced something so high, no one would buy it? How do I know where the line is? Thanks for your help, Chris. All right, Sean, so here's the thing.
Ultimately, the market will tell you what's feasible. So if we go back to Chase Jarvis, Chase is a photographer among many other things. He's also an author, founder of CreativeLive, et cetera. But originally he was a well-known photographer who worked with lots of famous people, Roger Federer, Serena Williams, and so on. So if we take the case of photographers, imagine someone is doing portraits or photo shoots for $500 a day.
And at 10X, if he's gonna raise his prices 10 times, that would jump to $5,000 a day. So there are definitely people in the world who will pay $5,000 for a photo shoot. They just aren't the same people who will pay $500, but they do exist. So I'm not surprised that in theory it can work, raising so much. And yes, ultimately there is a price ceiling somewhere, but who's to say where it is?
You don't really know until you discover it. That said, I also understand the hesitancy to raise so much. So here's what you do. If you're in that situation where you're really busy, you're overwhelmed, you only have time for a small number of clients, and you're fully booked, you begin raising prices with new customers. You introduce your price increase to new customers while keeping the same price to everybody who's already paying.
And that's actually what my therapist did. When she sent that email, she said a year ago, she had raised her prices for new clients, but now she was finally going around to make it consistent for everyone. So once you start to get busy and new inquiries continue arriving, start quoting that much higher rate to those people and see what happens. And if every single one backs out, then you know it might be too much. Like that's the market answering that question for you.
But if some accept the higher rate, potentially a much higher rate, then you know you haven't gone too far. And over time, you can then communicate to the existing customers, "Hey, the price is going up for you as well." Because that's normal, that's how life works. Things just cost more over time. There's no reason why your service or your product shouldn't cost more over time as well. So Sean, that is my two cents, or maybe I should say 20 cents, right?
'Cause inflation prices go up. That's my 20 cents. Listeners, if you have a question or a comment, come to sidehustleschool.com/questions. We will continue to feature them along with updates from listeners as they launch their projects. Thank you so much for tuning in.
You can subscribe or follow wherever you get your podcasts. My name is Chris Guillebeau, this is Side Hustle School. [Music]
- From the Onward Project.
