How do you go about pricing in a recession? It’s going to be a difficult time for many people, especially as prices are going up and inflation is at a record high. So how can you effectively grow your business when things are so tough right now?
You have to remember that, although it’s a difficult time for some people, it’s not awful for everybody. And the recession won’t heavily affect some business owners. And a recession doesn't mean that businesses aren’t investing in your services - people are still spending.
But I know what it’s like. You want to continue helping people during a recession, but you don’t want it to adversely affect your business. So here are some tips to help you continue helping your clients, without neglecting your bottom line.
Not every market is created equal. Start by thinking about your market. Are your products or services classed as a luxury service or is it something that’s considered an essential? No matter what type of product you offer, there is a way to package it to amplify its worth. There’s also a way you can help people, no matter how squeezed things feel at the moment.
And with helping people who cannot afford your services, it is better to go through formal channels. This means going through a means tested route so you can help those who genuinely can’t afford things, rather than those who are using it as an excuse.
Cutting costs is always a good starting point, when looking at riding out a recession, but don’t cut everything. Have a good solid review of your costs and cut away those things you don’t have the energy for or don’t need right now. Also cut back on those things you’re not using. You can also stop investing in new things, but don’t cull your marketing budget too much, as you’re going to need that in order to grow.
But always make sure you're still paying yourself, as that’s really important. Because actually, your costs are still going up and you’ll probably need to pay yourself slightly more at the moment to cover household bills, etc.
You might need to redo this, if you haven’t revisited yours recently. And if you haven't done it yet, you can sign up for my pricing calculator at https://thepricingqueen.com/pricing-calculator. Use it as many times as you like. Go back and revisit it too, because if you need to earn more, because of higher costs or rising business costs, you may well need to put your prices up. And that's okay.
And once you know what your minimum hourly price is, don't go below that. Because if you do, then you're working for not enough money and that can lead to many problems. But also, if you need to take on lower priced work, do it consciously, knowing that you will not make very much from it.
Don't lower your prices too fast. It's really tempting to just cut your prices, even a discount of 25% doesn’t seem too bad. But definitely don't do it until people come to you and say they can't manage your prices. Instead, try to have a reduced offer. That way, when someone says they can’t afford to pay you your price, you don’t have to discount as you have a reduced service to offer instead.
It’s about thinking about what kind of reduced service you can offer. If you're offering a £500 service, and they only want to pay £250 - how do you reduce your service so that it's still commensurate with only paying £250? Because the last thing you want to do is agree to a reduced price for the same service, as the client will behave like they’re paying the full price. This is where you have to be really strict with your boundaries!
This is all about pricing up your services into fixed price packages. You and your clients then know exactly what they’re getting and can budget accordingly. The price won’t change, and you both know exactly what they’re getting for that price each month. You then have a guaranteed amount coming in each month and the client is happy knowing what they need to set aside.
You could also offer a short-term reduction in pricing. But be really careful about this, because it's really tempting to just offer a discount, without thinking long term. The problem with a recession and the way prices are at the moment is something I don't see changing soon. Just look at COVID - you reduce your prices and it’s still going 12-18 months later. It’s then really difficult to put your prices back up. So if you’re offering a reduction in pricing, have a really fixed position on when you're going to put them back up again or at least review it.
Pricing in a recession isn’t something that should be difficult to navigate. My top recommendation would be to always try to have something you can offer people, when they come and say they can't afford you or will need to reduce what they’re doing with you. That’s where the above tips will come in really useful, as you can cover a wide range of scenarios.
And if you’re having trouble selecting things or want some help with this, reach out. We can book a power hour or a strategy session to go through it together - you can find details for working with me here.