Bit of a shocker the other day when I visited my local garage, £70 for half a tank of diesel and £40 on the strimmer and mower cans! £1.69 per litre and I fear it’s still on the rise!
It’s not just at the pumps though, everything else seems to have a bit extra added on in the post spring bills, from water rates to council tax and more. What really brings it home is my annual hunt for cheap gallup amenity. Last year £25 for 5 litres delivered. This year, same product, upwards of £65 and what’s more they’re adding on a hefty delivery, just to add a bit of salt to the wounds.
So what’s a gardener to do? Raise your own prices of course. The problem is I’ve been a bit lax over the past couple of years and haven’t approached customers about increasing my charges, mainly due to the uncertainty of covid and all of it’s implications.
So what’s the best way of tackling this tricky subject with customers who might well be feeling the pinch themselves? Looking online the general theory is that you put everyone up by the cost of inflation and hope for the best. You might lose a few clients but you will have a greater income from the remaining customers. You then replace those lost accounts with new ones at the increased rate then you’re quids in. Sounds simple. Not if your customer base is weighted towards a few big accounts that you can’t afford to lose however. Then it’s a bit more of a gamble. Even big contractors can have clients that have multiple sites that present a major proportion of their overall business.
According to the office of national statistics the overall annual inflation rate up to January 2022 was between 4.9% and 5.5% depending on whether you include housing in the ‘shopping basket’ of goods checked for price rises from the previous year. So just as an example, if you are charging £25 per hour then that would go up to £26.37 per hour to stay inline with inflation. That would mean that if your are averaging 35 paid hours per week your turnover would increase from £875 to £923 per week, a £48 per week increase.
If you have not increased prices over the pandemic then you have lost £104 per week as a three year price increase at 5.5% would give you £1027 per week based on three year on year increases at 5.5%. Quite a bit of dosh! It really shows why you must put up your prices with inflation every year or you’ll be left with a yawning affordability gap should prices start shooting up and you need the money. In order to catch up that price difference of three years without a 5.5% increase each year you will need to ask your customers for a 17% price increase to get to that £1027 figure. Not so easy to justify 17% as it is 5.5%!
So what about those customers that you can’t afford to lose? Personally, I tend to put in a ‘suggested’ price rise and not an ultimatum. You might be surprised at what they’ll accept, and you get to keep the job if they don’t like your ‘suggestion’.
Whatever you decide to do, you can’t sit on your hands. Inflation looks set to rise and you could be left with a non viable business very quickly.