When do we raise our rates?

Here's how this issue is dealt with using the devil's advocate position:

"The economy is so bad we cannot raise our rates...if anything, we should lower them."

"We must raise our rates because revenues have been down and we must make up for the shortfall."

Are you contemplating this dilemma? There is no simple answer. One of the fascinating aspects of capitalism is that the "market" sets the rate.

A local recreation business raised their rates this year, and business has dropped 10-15%. Are they related? They aren't sure and will spend the next two months scrambling to adjust the rate to drive demand to try to make budget.

How do you determine what the market will bear in your business? One way to find out is to ask customers, former customers and prospects about the perceived value of your services. When I visit my favorite steak house with my wife, spend $120-$150 and come back 6-8 more times in a year we have said that the price is right. If the Fillet Mignon costs $5 more I will continue to go because the experience is exceptional. There is a tipping point based on price and my discretionary income.

Communicate with those who know your business well. Surveys, focus groups and interactive media will assist in the dialogue. They will help you price your product as well as anyone.