Have your costs risen?

• short read – 4-5 minutes

Are you thinking of raising your detailing prices? When was the last time you reviewed you business costs?

By reviewing, we don’t mean glancing at your competition’s websites, or asking “…am I charging too much?” on a Facebook page – but when did you last actually sit down and re-do your own calculations which dictate your service prices?

It’s easy, especially when you’ve been in business for a while, to let time pass assuming you’re still covering your costs, based on your calculations a year or two back – or was it three maybe…? But with a raft of running costs and charges potentially increased since then due to wars/pandemics/political crises/global warming (delete as appropriate), it’s worth probably having a quick tot-up to make sure you’re not working solely for the love of the job…

Fixed costs

These are the things that don’t change from day to day: your rent, your energy, your insurance and your own personal costs – yes, those matter too, because you need to earn enough to pay your own bills as well as the business’s. Domestic energy has at least some price protection, but business energy has none, so commercial rates can jump with little warning and leave you shifting an uncomfortable decimal place on your annual energy costs. Water is another culprit, along with business rates, waste removal, and other fixed “essentials” all jumping with inflation hikes.

If it has been a while, you can download and use our Fixed Cost calculator to work out your fixed outgoings, or for a broader picture our updated Pricing Calculator goes into greater detail.

Variable costs

Unsurprisingly these will… vary. The amount you spend is usually relative to how busy you are, but keep an eye on the item costs. Chemicals, accessories, fuel and tools have all climbed in recent years – supply shocks, higher import and shipping costs and raw-material shortages have fed through to prices across the board, and your chemical spend in particular can creep up faster than you notice.

The simplest way to use less and be more profitable is to get your dilution right: the cumulative saving from correctly diluting to the recommended ratios, rather than “an inch in the bottle and top up with water”, can be vast and make your overheads far leaner over time. Tell people they would be saving £5 a day across all chemical usage and many wouldn’t bother, considering it unnecessary hassle – frame it as over £1500 a year and it starts to become interesting…

You should also keep an eye on prices of your favourite brands, the manufacturing location can cause some company costs to vary dramatically through local issues, shipping costs and legislation. Several years ago, a factory in Japan caught fire, which supplied OEM screenwash to many car manufacturers – causing a shortage in the market and prices to spike as these large companies looked to source from smaller providers.  Even UK based brands are subject to swing depending on government policy changes, import prices of raw ingredients, and more. Sometimes a switch can save you money with very little change in effect.

Employee costs

If you take on help, the National Living Wage, employers’ National Insurance and commercial insurance all tend to rise year on year – and the rates change regularly, so a figure that was right when you set your quotes can quietly fall behind. Factor these in too late and you’ll be undercharging by the time the work comes due.

There’s also secondary costs to keep an eye on – if employees are using company vehicles, insurance, fuel and maintenance are constantly on the rise, so ensure your costs are met from all angles when reviewing.

Nobody likes raising their prices. Some see it as being uncompetitive, others fear they’ll lose customers who are already tightening their belts.

All completely understandable.

The reality is that as long as inflation exists, costs, and therefore prices will always rise. Your business also needs to survive and grow, so running at a loss or as a charity is unsustainable.

One way to mitigate shock rises is to enable customers to spread payments using pay later services, or set subscriptions with you directly so they can budget in the medium term. Instalment services such as Klarna or Paypal allow customers to pay in three or four chunks whilst you receive the money for services up front, but be prepared to lose a percentage for the benefit of these services – usually around 4-5% – as a cost of business for the increase in uptake.

We generally advise against regular price changes, as this can be unsettling for customers, but an annual review is normal, and if they change due to global circumstances then it’s more expected as clients see the rises everywhere.

There isn’t a simple answer, and each business needs to handle these pressures in whatever way sits most comfortably – but don’t let it come as a surprise. Work out your costs and revisit them regularly, and if it ends up costing customers a little more – that’s inflation. Pricing and cost control are core parts of our Career Development courses, and if you want to nudge prices up without losing customers, our guide to psychological pricing is a good next read.