When to
Raise Prices
Raising prices for
your services is inevitable. The cost of operation tends to
increase every year. To compensate, price increases are the
most common remedy. Unfortunately, few grooming business
owners with a few or more employees study productivity and
cost-efficiency looking for ways to maintain price levels and
profitability. The only solution is then to raise prices.
As consultants
that have reviewed hundreds of financial statements for
grooming businesses, we ask that you trust our experience and
understand that most grooming businesses operate somewhat
inefficiently, and they keep raising prices to compensate for
their own inefficiency. It becomes a major problem when you
out price your services for your market, and then many of them
come to us to learn cost-efficiency once trouble has onset.
In defense many
groomers say some "weird things." For instance, if
you promote cost-efficiency you risk the safety and comfort
of the pets being groomed, or you cannot use the best
products or equipment in a cost-efficient operation and you
don't care about pets if you are focused on your income and
expenses. Wow! We have heard even more extreme allegations.
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I ask them,
"For your service fee do you provide pet owners with
the assurance that you have a written safety and supervision
plan for pets and people, and that you have written and
hands-on training programs to instruct employees in your
standards of operation?" The answer is almost
certainly, "No." I reply, "But you have said
we don't care about people and pets, and we risk pets,
employees etc. Well, we do and our clients bond to our
business for many reasons including this one, and yet our
fees are less than yours, we use the same or better
products, we offer more client services, we have
state-of-the-art equipment, etc. and you charge more and
give them overall less. Are you not at least curious how we
do that? Why do you instead criticize and foment
misunderstandings, in defense?"
Management
training produces remarkable changes in groomers' attitude toward cost efficiency and productivity.
It means that they can improve their profitability without
always having to "ding" clients for more. The
largest and most successful businesses in the U.S. do not
have a history of frequent of price increases, consumers
don't like it and it forces the "shopper" pet
owner to go "shop around."
As a whole this
industry has a serious problem. It's difficult for most
grooming businesses to justify the fees groomers deserve. At
the heart of the movement vocationally licensing the
profession, or another form of required certification, one
would hope that as a result groomers could justify and receive
better service fees. Look around at other vocationally
licensed professions and most are considered good to very good
income generators for its members by the public. It's not
likely that any state is going to vocationally license the
grooming profession any time soon, so the hope of using that
recognition to justify better fees is not going to be reality
soon.
The irony of The
Madson Management System for Pet Grooming Businesses,
based on the system of management developed in one of the
world's largest salons now nearly 50 years in operation, was
that the business offered more pet care services and many
client services, for median fees. Consumers enjoy getting
more for less. Every pet is given humane pet care, safety
and comfort, artistic styling and a broad menu of client
services. They were no cutbacks! Employees are given the
same wage levels too. It's just a matter of rethinking
productivity, cost-efficiency and your service fees.
Let's take a
brief look at some of the standards behind The Madson
Management System and its attitude toward price increases
and overall service fees, and how to raise prices.
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You have
to know how to read your monthly financial statements,
especially the Income Statement. How can you
determine profitability if you don't know how to read
the Income Statement which clearly states how much
income you took in, and how much was spent in operating
expenses? A good bookkeeper is essential to a busy
groomer, and they can help you to learn how to read your
financial statements. How many bankrupt or near bankrupt
groomers that we talked to wished they would have
learned this simple practice, and done it every month as
a preventative measure? All of them.
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Give your
clients more than just a great grooming! The Madson
Management System provides every pet with a written
Madson Pet Groomer's Report and Health Alert Form. It
costs about a nickel, but makes the client feel like a
million and it separates you from the majority of shops
not using one. It takes less than a few cents of labor
to fill it out too. What else to you provide for the
owner, the one who is paying the bill. Clients, not
customers, stay with a business for years and pet after
pet. They do that with a business that not only
recognizes the importance of great grooming services,
but CLIENT SERVICES. Appreciated clients are far more
willing to absorb price increases.
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Don't
raise prices every year, or more than once in year! If
you raise prices every year your clients will anticipate
it and more often than not you will hear the bemoaning
clients start complaining about prices. Your price
increase should be no more frequent than every 2 years
under most circumstances. If you raise prices no more
frequent than every 2 years, let your clients know that
when informing them of price increases.
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Don't
make excuses for raising prices, be informative. Most
clients can relate to increases in overhead just as
their household budget is affected by increases in
household shopping, power, water, food, cleaning
supplies, etc. Convey that in writing at least 3 months
ahead when announcing the need to raise prices. Affirm
that the price increase assures your ability to continue
to deliver the standards of pet care and client services
they have come to expect. Besides mailing your regular
clients the price increase letter, post it as a sign in
your entry way. Remind clients that their next grooming
appointment will cost more if they are scheduling after
the price increase takes effect. Once it is, make sure
pet owners dropping their pet off know what the grooming
service will be when they return.
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Ensure
the need and amount for your price increases. Do you
have a budget for your business like a household budget?
If not, you are operating a business with some level of
whim as all businesses of any trade are expected to have
a budget, even grooming businesses. Many owners without
a business budget for at least the next three years do
not adequately raise prices and then find themselves
raising prices once or twice a year, and that doesn't
grow a business or maintain stability. Many of our
clients maintaining budgets and monthly reviews of their
financial statements discovered that they could delay
raising prices, or moderate the increases, because they
discovered ways to promote more cost-efficiency.
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The most
financially successful business maintain median prices.
From just a financial point of view, the most expensive
shops are rarely large businesses. Which ever way you go
is your choice, but if you want to grow a major business
you will likely do so by maintaining high-end MEDIAN
prices. This theory is largely covered in The
Madson Management System publications, and there are
many businesses using this system that are "living
proof." We have clients taking in at least $500,000
a year and some much more, and NONE have what would be
considered expensive prices for their area.
Most groomers
are not paid their worth for the hard work of grooming pets.
However, unless groomers take more time to study the
management of businesses they will find earning the
profitability they deserve impossible, or at least, very
difficult. Lack of business education is the most profound
source of problems and not consumers who have not been
educated in what it takes to groom pets. As a whole, our
industry is not conveying in any form what it takes to groom
pets to millions of pet owners, and that makes it all the
more difficult to raise prices and justify better fees.
You will find
that businesses that provide extensive and very informative
promotional materials detailing your grooming and client
service procedures, such as the Madson Pet Groomer's Report
and Health form, Madson Pet Care Services Brochure and
Madson Client Services Questionnaire gain more respect for
the work of grooming pets from their clients. In this way
the are actually justifying better fees, enduring far less
client objections to price increases and losing less clients
to another groomer who charges less.
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