Before we dive into strategies for changing pricing in your event rental business, I want to make a note that your pricing strategy should ALWAYS allow for profitability.
Far too often, event rental business owners price their products and services too low because they are eager to build their businesses or are desperate for people to book them. However, if you aren’t making money on every single rental, on every delivery, on every service you offer, you won’t be able to build a business. Instead, you’ll build debt and dig a hole you can’t sell your way out of. So, before we talk about when and how to change your prices, I want you to make sure that your pricing strategy is built on a solid foundation. If it isn’t, skip this whole article and go back to basics. Change your pricing TODAY so that you can start making money. If you can’t make money at this business, it isn’t worth doing.
Now that we’ve got that established, let’s talk about how you can make pricing changes in your event rental business. Raising your prices 5-10% for all items every year is a great strategy. This doesn’t mean that you have to raise the price of every item by 7%, although it could. Rather, I suggest that you look strategically at the utilization of your collection and decide which Items can bear the greatest increases. For instance, if you find that your Farm Tables have high Time Utilization numbers compared to the rest of your collection but lower than average Dollar Utilization, you’ll want to raise their prices more than the other pieces. However, if a Chair in your collection isn’t going out much but has relatively high Dollar Utilization, you may want to keep its pricing stable (or even lower it), to encourage people to use it more.
However you decide to raise your pricing, you’ll want to make sure that the average of the collection overall is increasing 5-10% per year. That may mean that some pieces get a 20% increase, some only 5%, some 0%, and others may even decrease in price. But when you look at your collection as a whole, if you were to rent the same pieces next year for the same amount of time as you did this year, you’d expect to generate 5-10% more revenue.
Don’t forget to do this with all of your fees as well. Delivery fees should increase year-over-year. Onsite labor, styling services, consulting fees, and any other services you offer should all be increased by 5-10%.
At this point, you may be saying, “but, I’m struggling to sell as it is,” or “my market won’t bear higher prices.” Before we go any further, I want to remind you that all of your costs go up by 5-10% per year. Wages rise. Your warehouse rent goes up. Insurance rates on your trucks increase. You have to pay more for fuel. Almost every expense you have is going to cost you more next year than it did this year. If you do nothing, you’ll work just as hard—or harder— to make less money.
As a side note, if your business is growing like gangbusters or if your collection is in great demand, you may decide to increase your pricing by more than 5-10%. Whatever you decide, keep in mind that your prices should go up by at least this much each year.
As for when to make pricing changes, in general, I see event rental businesses do this about once or twice per year and typically at the beginning of their booking season (often January but in some areas of the world, it’s actually March or July).
But whenever you decide is right for your business, a price change as an opportunity to generate more sales. Before you make the change, contact all clients with open Proposals and let them know of the upcoming price changes. If they’d like to ensure the pricing they’ve been given, they need to book before that date.
You’ll also want to contact all clients with Confirmed Orders and let them know about the price changes coming up. Let them know if there is something they’d like to add to their order, they should do so before the price change to get the current pricing. Additionally, you should get in touch with cancelled or expired Orders and let them know about the price change. If they are still interested, they can still book at your current pricing before prices increase on X date.
In each of these circumstances, let’s be clear that you will honor pricing of existing orders and Items confirmed before the price change. But after the change, you will be renting the items at the new rate. The point of contacting people is to get them to act now because these current rates will no longer be available after X date.
Price increases are also a perfect time to get in touch with planners, designers, vendors, destination management companies, industry contacts, and other referral sources to touch base. People always appreciate being in-the-know. If these insiders have something coming up that they want to use you for, they’re more likely to book now than wait.
Just like you’d use any other incentive or strategy in your business to get customers to do what you want, use a price increase to move your customers to make the decisions you want them to make. Help them see why it is in their best interest to act now rather than wait. Show them the benefits of making the decision and pulling the trigger.
Hopefully you see a path for increasing pricing in your rental business. But here’s a quick review:
- Increase the prices of Products and Services by at least 5-10% per year.
- Strategically increase the prices for your Rental Items based on Utilization—some will increase by more than others.
- Remember that your expenses are increasing year-over-year so if you don’t raise your prices, you’ll actually make less money for the same amount of work.
- Most rental businesses raise their prices once per year at the beginning of their booking season.
- Before you make your price change—
- Contact all customers with open Proposals to encourage them to book before the price change to lock in their pricing.
- Contact all customers with Confirmed Orders to encourage them to add more Items at current rates before prices go up.
- Contact all customers with Expired or Cancelled Orders to let them know if they are still interested, this is their last chance to get their Order at the current rates.
- Contact industry partners so they can place Orders for upcoming events before the change goes into effect.
- Use the price change as a strategy to generate more sales and get people to take action now rather than wait. It is in their best interest as well as yours.
If you want to walk through when and how to change pricing in your particular event rental business, we’re here to help. Whether you need to get that solid pricing strategy foundation in place or are tweaking to maximize impact and profitability, a consulting call with RW Elephant CEO Allison Howell can help you take these concepts from “good idea for some day” to “SOOOO glad I did that!”
To schedule your consultation and start implementing now, check out Allison’s paid consulting schedule.