Honesty is the best policy when it comes to increasing prices

3/11/2011

Customers are still incredibly cost-conscious, often looking for the lowest prices or discounts that will help them save money. Still, one of the cornerstones of expansion is raising prices, which this helps entrepreneurs hire more employees, create better products and purchase new equipment.

The American Express Open Forum recently discussed the best ways for entrepreneurs to raise prices without losing their existing customers. The key, says the source, is to be upfront and honest with customers. Company owners should tell customers that they need to lift prices to produce higher-quality products and services and to stay in business.

Additionally, business owners shouldn't spring price hikes on customers out of the blue. "Customers do not react kindly to a surprise rate increase. Soften the blow by offering plenty of advance warnings. Dividing the increase into several smaller increases over time may be easier for your clients to accept rather than one huge spike in price," suggests the source.

If companies are struggling to make ends meet, they should also consider commercial loans. While price increases are more sustainable in the long run, loans can help with some short-term funding.