Raising Prices post-closing
April 06, 2025
by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA
I'm far along on two separate deals, and in both cases, it's clear that their prices are below market. For example, I secret-shopped one service, and the target co prices are 10-20% below peers. It makes more sense when talking to the owner, too.
Has anyone purchased a business like this, and what's your experience raising prices (or attempting to raise prices) post-closing? I'm not naive enough to think I can just put through a 10%+ increase and keep it all on day 1...
from Harvard University in Sammamish, WA, USA
We gave existing customers a 3 month notice, had a reputable PR consultant help manage the communications process, repeatedly emphasized the price increases on almost a weekly basis, and walked through the added services we would be able to offer. We anticipated 5%-10% of customers would not return. We trended to that until about a week before the price change, and then saw over a 20% loss of customers essentially overnight, and still had more after the change who said they were unaware the changes were coming.
The bottom line is you will have customers who choose the business because it’s the low cost option, and you will have issues in rolling out changes even if you do everything right. Learn as much about the customers as you can. If they are focused on budget solutions, you have to focus on cost structure, not pricing. If the business positioning isn’t based on price, build a solid marketing plan to attract new customers at the new price before impacting existing customers. This is all easier said than done because typically a business cost structure is there to support one or the other and changing that means materially new customer profiles.
from Northwestern University in Chicago, IL, USA