Should I increase my rates?

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A waste hauling business has four primary responsibilities:

  1. To its customers, to provide a good value in service for the rate that is charged,

 

  1. To its employees, to provide a safe, meaningful and respectful work environment for a level of pay that is fair and equitable,

 

  1. To its vendors and its community, to pay its bills and taxes in a timely fashion and according to agreements the company has made,

 

  1. And to its owners, to provide a reasonable profit and return on their investment, and the ability to reinvest in the business.

 

From time to time, there is a need to adjust rates to reflect the increased cost of providing service to our customers.  Disposal, insurance, wages, equipment and other costs increase over time, and a business needs to cover the costs it can no longer absorb.

 

Here are some thoughts to consider regarding rate increases:

  • Long before you increase rates, make sure your service quality is high. Customers will not want to spend more if your service quality is poor.

 

  • Do not apologize for a rate increase. Many of the reasons for a rate increase are out of your control.

 

  • Prepare your staff by providing talking points to defend your rate increase.  Consider giving “good” customers who complain an extra quarter at the old rate to adjust their budgets accordingly, or offer an alternative such as a smaller cart.   Taking calls about a rate increase is never fun.  The reality is the callers are but a very small fraction of your total customer base.  Break the increase down, instead of saying “$1.00 per month”, say “less than $.25 per week”.

 

  • If you offer a discount for paying annually, now might be a good time to convert some quarterly payers to annual payers.

 

  • When explaining a rate increase, highlight the features of the improvements you have made to your business, for example, new hi visibility uniforms or other safety enhancements for your staff or new trucks that emit less pollution. If the reason for the increase is a landfill rate increase, list the ways the landfill protects the environment.

 

  • Small regular increases may be easier for customers to accept than infrequent, larger increases.

 

  • Remember, a dollar from a rate increase falls right to your bottom line. $100.00 from a rate increase requires no additional investment in equipment, no added hourly cost, disposal or fuel cost.

 

  • Yes, there will be pushback from some customers. Usually, these are customers that came for a low price, and would leave you for the next low price or special deal that comes along.

 

  • Have an automatic escalator in contracts that is tied to a percentage, perhaps 3 – 5 % per year. While customers don’t like to see their costs increase, knowing what to expect is helpful for them to make their plans.

 

  • Many times, companies write long explanations as to why they need to increase their rates. Keep your explanation brief and to the point.  Some even raise the rate with a simple one line statement:  “Due to increased costs of doing business, your next invoice may reflect a small increase in your rate.  Thank you for the opportunity to serve you!”  Sometimes, saying less is best.

 

Increasing rates is a necessity.  Watch your costs, and adjust your rates accordingly.   Don’t end up like the hauler in the letter above.  If you would like to leave a comment, click on “comments” at the top of the post.

 

Thanks!

20200124 Out of business letter.