Stuck prices requires a leap

Many years ago, I ran a software development house.  I and a team of 4 other developers wrote and supported bespoke software for a range of clients.  We were writing what would now be called an ERP system, without the finance bit.

Around the time my second son was born, over 12 years ago, the company finances were in dire straits.  Before we grew, I was involved in the coding and we were successful and profitable, however over time, I got less involved with the coding and we started to make less and less money.

And one day, after a rather sleepless night, worrying about how to make the payroll that month, it occurred to me that we were undercharging for our services.  How did I know?  Well, I hadn’t put up our prices for several years.  Despite salaries rising, rent and rates rising, and other costs increasing, our base hourly charges hadn’t moved.

When I sat down to work out what we should be charging, it was confronting.  We had left prices the same for so long, the jump between what clients were being charged and what we needed to charge represented almost a 50% increase.

Given my reluctance to increase prices to date, having a conversation about a 50% price increase was not something I was looking forward to.  It felt a bit like being on one side of a chasm opening up in the ground, where the far side was getting further and further away.  There comes a time when you have to decide to make the leap or risk never reaching the other side for fear of falling in.

Thankfully that was many years ago, and since then I’ve educated myself about pricing strategies and how to ensure that stagnant pricing doesn’t creep up on you and if it has, how to get over it.