The Black Girl Business Bar

For online business owners, when it comes to inflation, you should immediately start thinking about raising your prices. Here's why.

Show Notes

I want to speak to you about inflation and what it could mean for your business. Here's what you should be thinking about when it comes to inflation and how it relates to your prices as an online business owner.

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More on Khalida
 
Khalida DuBose is a business coach specializing in mindset and simplified business strategy. As a previous crowdfunding coach, she supported more than a thousand crowdfunding campaigns and project creators in their quest to bring their dreams, passions, and ideas to the world. Now, she focuses on helping women of color online business owners nail the foundations of running a successful business and cultivate a rock-solid mindset as they navigate the entrepreneurial journey. For more information on Khalida, visit khalidadubose.com. Follow Khalida on Instagram @khalida.dubose. You can email her at khalida@blackgirlbusinessbar.com.
 
The Black Girl Business Bar is produced by Zuri Berry (@ZMCPodcasts). Music by Vincent Tone and Die Hard Productions.

Creators & Guests

Host
Khalida DuBose
Business + Mindset Coach
Producer
Zuri Berry
Principal Producer at ZMC Podcasts

What is The Black Girl Business Bar?

The Black Girl Business Bar Podcast is for Black entrepreneurial women who crave practical information to implement in their businesses and careers. They want tips and tactics that work and they want on-the-go mentorship that will make a difference in their businesses, projects, and lives.

Hosted by business coach and crowdfunding expert Khalida DuBose, the Black Girl Business Bar is all about letting Black women know what's possible for them in their entrepreneurial journey.

Hey friends, this is the Black Girl Business Bar podcast. I am your host Khalida DuBose. If you're new here, welcome. I cannot believe by the time you listen to this episode that we will be at the end of July. It has been such a hot month here in Colorado, but I've been enjoying every moment of it.

Today, however, I want to speak to you about inflation and what it could mean for your business. What you should be thinking about inflation and specifically what you should be thinking about when it comes to raising your rates in your business.

So last month in June 2022, if you're listening to this in real time, inflation reached a 40 year high. So for those of us who aren't 40, yet the last time there was such a sharp increase in inflation was in 1981. So last month in June, it rose to 9.1% with food shelter and gasoline prices being amongst the most significant increases. So I'm sure we are all feeling it at the pump in the grocery store. And if you happen to be in the unfortunate position of looking for housing right now, like I am, then you're definitely seeing it in rental prices.

So to put this in perspective, the federal reserve targets a 2% inflation rate based on the consumer price index. So really what we usually look at, just so that, you know, what's normal is 2% adjusted year over year. Right now we're at 9.1%.

So before we hop into all of this, let's just get a couple definitions outta the way so that we all are on the same page.

Really quickly.Inflation occurs when prices rise across the economy causing decrease in the purchasing power of your money. So basically prices go up and your spending power goes down. Inflation has two main causes, demand pull and cost push. Both are for raising prices in the economy, but they work slightly different from each other.

Demand pull conditions occur when the demand is coming from consumers and that pulls the prices up. Whereas cost push occurs when the cost is going up because of supplies.

So when your supplies costs go up, it forces the prices to go higher. So just think like, if you have. A, uh, business that's in like the restaurant or you have physical business, like you have physical products and your suppliers, their costs are increasing. Then they're going to, that's going to go to you as a end user, which is gonna force everybody's prices to go up and demand pool will look like, you know, being a service based business as well. And you have so many customers that you now have to rise your prices to. Take care of demand. So we'll talk about that a little bit later. All right.

So what should we be thinking about as online business owners, especially solo entrepreneurs or people who are still fairly in the early stages of their business. And I'm not talking about years, I'm talking about like fairly early stages where you're still trying to become profitable and have a nice cash flow in your business. Should we even be thinking about inflation? Does it matter? What do people think when they hear this? So in my experience, you know, I actually talked to a few people about this and I had, at least one client come to me and say, should I raise my rates because, she's gonna start signing new clients. Another round of clients and things are getting so expensive out there. What I usually see is that people do nothing. People typically do nothing. and they think, you know what, let's just hold on, put our head in the sand and hope that this ends quickly, right?

So they don't really understand what inflation is. They don't really understand how it affects them. So they do nothing. But I want you to realize that if this is you, if you're doing nothing, if you're not thinking about this, if you're not even considering it, when it comes to your business, realize that it is going to affect your bottom line in the long run.

So remember that if you are thinking, should I raise my rates? You, you might wanna think about the fact that inflation is now, even if our prices go down a little bit, we're now at like a new floor. Okay. So we have a new floor, meaning like this is the baseline of what the costs are gonna be.

I'll get into that a little bit too in a second, but what I really think that you should be doing, and this is, you know, kind of how I was answering my client's question, is look at your business expenses and see how your business is going to be affected by this. So for instance, do you pay any contractors like a social media manager, a VA, a podcast manager, are you working with a copywriter? Are you working with a web designer? Are you working with other business owners who are also raising their rates? And so now you're gonna be paying them to do the same job that they were doing maybe a year ago, you're gonna be paying them slightly more because they had to raise their rates.

Are you paying for software costs? Probably yes. And while a lot of us, you know, pay for our software costs a year at a time, maybe we pay for our website yearly. We might pay for certain tools yearly, just anticipate, even if you're not feeling that increase now that the next time is time to redo that contract or reup your software, that they're probably going to increase it. So it's probably smart to go ahead and anticipate. And then think about paying yourself or paying your business. Okay. The difference between the two is like, if you're not taking a full salary from your business, maybe you still work nine to five and you're just allowing your business to get some legs.

You wanna still pay your business so that you can still create the same quality programs are the same quality for your customers. If prices are going up and you're still working with the same amount of money, then that means that your quality might go down. So think about paying yourself or paying your business, okay.

Now, what if your business, if you're a business owner who already has reservations about raising your rates outside of inflation periods. Okay. So that's a lot of you guys. I wanted to address this because a lot of people have a hard time with the thought of raising their rates in the first place, let alone now. Okay, now I have to figure out this whole inflation thing, right?

So, honestly, if you're already struggling with this, you're probably gonna still be struggling with this, even during this time of like really sharp increases in inflation. But I always think that if you're having a hard time raising your rates, when you really need to, we're not talking about just like, oh, I want more money. Let me just raise my rates for no reason. Right. But when you're really realizing that, like, hey, I need more money to do this job, or I'm not able to provide a really good service because I'm putting in so much time and I'm not getting enough pay out of it, and you still have a hard time raising your rates, this means that you probably don't have a good grasp on why you should be raising your rates, or something else is holding you back.

A lot of times I hear things like I need to remain accessible. I need more experience before I can raise my rates. When I hear that, I think there's something else going on with maybe your confidence or there's, you know, the idea that maybe you don't understand who your customer is, or you haven't narrowed down that customer when you're thinking you need to stay accessible to everybody.

All right. My advice here is just sit down and think about what your business is looking like right now, what are your expenses? What are you paying out? What is going on so that you can have a reason even for yourself. So you can have this conversation with yourself on what would be smart and I'll get it into a few more things to think about later on, as you make this decision for yourself.

If you're not raising your prices right now, then you're just losing money. Okay. So I wouldn't always, if a customer comes to me or sorry, if a client comes to me and says, should I raise my rates? I don't always say, yes, you should raise your rates. You know, or if they say, should I start off with this price? We typically sit down and have a conversation based on what their business looks like. But right now I am saying that I think it's very smart if you are an online business or if you're any business, but I'm gonna talk to my online community, if you're an online business to really think about what percentage you need to increase your prices at.

So, remember inflation causes a decrease in your spending power. Okay. So while there's a chance that the food and the gas and the shelter prices will start to dip, they're never going to dip back down to two years ago or three years ago or four years ago.

Right. A good example of this is I lived in an apartment, you know, long time ago, back in 2008, super luxury apartment. It was beautiful and it cost me $810 a month. Right. So cheap by today's standards. And I moved out of that apartment after a while, and then I left Colorado and I came back five years ago and I went to see what the cost of that apartment was the same exact apartment and it was 1600 and some change. Right. So it had doubled in price that that apartment will never be $800. Again, even though prices have gone down relative, you know, relatively speaking, they've gone down and they've gone up and they've gone down. Okay. So keep that in mind. You're never gonna go back to that baseline.

Another thing to keep in mind, too, if you're thinking about not raising your prices is when we're employees, when you're in the period of your career, where you were an employee, if you've ever been an employee, which most of us have, you don't have the option usually of going to your manager and saying, hey inflation's going up. I need more of a paycheck, or I need you to match the inflation for my paycheck. You know, what usually happens is you have to start budgeting. You have to tighten your budget. You have to maybe let go of some things that, aren't necessity if you don't have enough money.

But when you're an entrepreneur, I want you to remember that you have the option of looking at things, you know, your business and making a really smart decision to say, hey, I need to raise prices by this amount so that I'm able to pay myself, I'm able to pay my contractors, I'm able to make sure my business is still thriving.

Just wanted to throw that out there because a lot of people don't remember that they have the option of making that decision on their own.

So here are three things, that I see keeping people from raising their rates a lot of times.

Right? So number one, the number one thing is fear of driving away your customer. Okay. So let's talk about this. First of all, I just wanna get this out of the way. Every new customer who's coming into your business is a new customer. They don't know what your prices were before. So if you decide to raise your prices by $500 as an example, they're not going to know the difference between yesterday, it was $500 less. Okay. So let's just get that out of the way.

I think a lot of times that is another like, excuse that's used like, oh, people won't be attracted to me anymore. Well, you know what? Those people don't even know what your price used to be. Also, let's say you have customers that you're working with right now, and they're not in contract or they are in contract and that contract's about to expire, and you have to have the conversation about rates going up. I want you to realize that nine times outta 10, you know, and yes, I'm making that, that, statistic up, but human behavior is such that when somebody is used to working with you and they like your service, they're not likely to leave just because your rates went up by a few hundred dollars, right.

They're more likely to make adjustments and maybe what, you know, how they're working with you. If they absolutely can't afford the new price adjustment. Okay. They might make adjustments, but they're not likely to leave you. Okay. people love to work with folks that they're familiar with, that they know have been delivering good service. So you don't have to worry about that.

The number two thing is, people believe, and I just went over this that people believe that they can't charge more. They're not giving theirselves permission. They're like, I can't, I don't have enough experience. I wanna stay accessible. People won't, wanna work with me. I'm gonna price myself out. Right? All of these things that are just in our heads that we have no proof about, everybody worries about these types of things. Okay. And then, then the third thing is, is that people lack the understanding of what's happening in the economy. Right? So right now with inflation prices up, this is a very perfect example. People lack, and they don't really pay attention to what is happening around them. And they think, okay, well let's just ride the storm and hope that it ends.

Okay. So, as I wrap this up, I wanna give you a couple helpful things for you to consider when it comes to raising your prices. And I really hope you will consider raising your prices at this time so that you make sure your business stays competitive and healthy and thriving so that it's around for a very long time.

So, number one, a good rule of thumb is to consider your skill level. If you're struggling, if you, if you're that person who is struggling with raising your rates right now, consider your skill level. A lot of people in my audience out there, my colleagues, my friends that I talk to, have so many skills and then they still doubt themselves. We all go through it, right? But look at your skill level and then look at the amount of experience that you have.

Let's say I'm gonna talk to the newbies here. Okay. Let's say you're just getting started. You wanna look at what the rates are in your industry for people at your level. And I'm talking about people who are priced correctly, not people who are undercharging. If you don't know exactly, you can take a median number or you can ballpark it. Okay. It doesn't have to be exact math and just think about, the level of service that you're providing or the value of service that you're providing that should reflect your price. Okay. So that's the number one thing.

If you're a person who always under charges, if you suspect that you're undercharging, because you're too scared to raise your prices. And you just really, you know, you have kind of the, the stories in your head about like, you know, I'm not sure maybe I don't have enough experience. Go talk to somebody who's objective. A coach, a friend, a colleague, somebody who knows your work, somebody who works with you, and talk to them about what your skills are, so that you get a more of an objective point of view when you're setting your prices.

All right, number two. What usually, um, is helpful is you have the demand for a rate increase. And again, I don't want the newbies to hear me say this and then say, nope, I don't have the demands. I'm not raising my rates. That's not what I mean, but I'm just giving you scenarios in which it's smart to raise your rates or it's smart to change your price accordingly. So you have the demand for a rate increase.

Right. So remember, this is the case of demand pull that we talked about earlier, where the demand from your customers is driving the price up. This will also likely make for the most significant price increase in your business. So what do I mean by that is you're not gonna be raising your rates by like 40 bucks, right?

So you're like, okay, I'm gonna add on a little, an extra 40 bucks onto each client run to each new account that I take. Now you're probably gonna be raising your prices by hundreds of dollars or thousands, depending on what you do, what type of business you have versus small percentages. Okay. And this is because you'll need to control the demand.

So I'll give you an example. , you know, a lot of coaches that I see once they're booked out or a lot of service providers, period, once they're booked out. They start booking into months and months and months down the road. It could be smart at that point. If the demand is just becoming too much for them to raise their rates so that they work with less clients.

And then a lot of times what they do is they have another offering that will allow for people who can't work with them at such a high price to still work with them or to still learn from them.

Finally, the third situation is in times, like now when the economy calls for it, right? So you could be new, you could be a veteran at this, but right now the economy is calling for it. I recommend that you sit down and you take a look at your business. You take a look at increasing your prices based on real business needs, versus just pulling that out of a hat, right?

Like, okay. I'm just gonna arbitrarily raise my coaching price by this amount, because I wanna raise it by this amount. No, sit down and look at your business. See how much is costing you to work with people. See how much your softwares are going up. Look at, you know, if you need to give yourself a pay increase, et cetera.

And this will probably help you, especially if you struggle with raising your prices, this will help you with any conversations you have to have with your clients. And it'll also help you to feel more confident in yourself when it's time to raise your rates. Right. Because you're doing it for an absolute good reason.

I think that it's smart in times like this, to also know where all your numbers stand, how much it costs to do business so that we don't start raising our rates arbitrarily, price gouging, and making it harder for us to do business.

All right, friends. I hope this was helpful for you. I would love to know what other questions you have about any part of your business. Reach out to me at khalida@blackgirlbusiness.com. And I just might bring those onto the show or answer them on social media.

If you found this episode, helpful, someone else may also find it helpful. So do me a favor and screenshot it and tag me on Instagram so I can say hi. I'm dropping episodes every other Tuesday this summer. And I can't wait to see you back then.