As a yard owner, particularly at a time when the cost of running a business is increasing, it is important to make sure that changes in your costs are reflected in the prices you charge your clients. However, many yard owners are unsure how to approach what is often considered a delicate situation.
Bills, particularly electricity and fuel, have been increasing rapidly, with many yard owners finding that this is directly affecting the running costs of their equestrian premises. For those who employ staff, the increase in the National Minimum Wage (NMW) this spring will be a further hit to running costs.
To make an effective change to the balance between your income and increased outgoings, it is likely that you will need to increase the price of your livery packages and services.
Review Your Running Costs First
Before making any price changes, it is important to carry out a review of your own costs.
Whilst it may be tempting to compare your prices with other yards in the same area offering similar packages, their running costs and business structures can be very different from yours.
It is therefore imperative that all yard owners understand their own running costs and use these to determine their price per stable. This means including every single business cost, many of which are often overlooked.
Yard owners should review their costs at least annually and, in situations such as we are experiencing currently, more regularly. This helps ensure that any price increases from suppliers are reflected in what you charge within a reasonable timeframe.
Don’t Be Afraid to Increase Your Prices
Whilst many yard owners dislike increasing prices for fear of losing clients, ultimately those who fail to increase their prices in line with their costs simply end up operating at a loss and subsidising the hobby of their livery clients!
Raising your livery prices does not need to be a painful exercise. It is much better to be organised and have an annual price increase included in your livery contract, rather than having to make a large jump in livery prices when needs must every few years.
This allows you to apply a small annual increase to keep pace with rising running costs. It is also something that clients know to expect and have agreed to in advance.
Incremental price increases are generally better received by livery clients and are easier on the purse, making client retention more likely.
How to Communicate a Price Increase
Any price increase should be dealt with professionally, ideally in writing and communicated to all liveries at the same time by sending out a formal Notice of Price Increase letter.
The notice given for a price increase should match your notice period for terminating a contract. For example, if your notice period for terminating a livery contract is 30 days, then the same notice period should be given for any price rise.
You should also ensure that the price increase applies to all liveries, including any new liveries subsequently arriving on the yard, without special arrangements or dispensation for certain clients.
Keep Your Notice Short and to the Point
It is best to keep your price increase notice short and to the point. Everybody knows that prices rise, and horse owners should not expect livery yard owners to be exempt from this.
There is no need to go into lengthy detail about how or why you have calculated the amount of your price increase, or to provide figures for your running costs.
You would not ask your hairdresser or plumber for a breakdown of costs if they chose to put up their prices!
It is best simply to state that your running costs have increased, requiring you to reflect this by raising your prices accordingly. A good point to make is that increasing prices in line with your costs ensures you can continue offering the same level of service and quality of care expected by your livery clients.
Include Annual Price Increases in Your Livery Contract
If you are unsure how to deal with an annual price increase, it is easy to add a clause into your livery contract setting out an estimated annual increase on a specified date.
The annual government inflation rates, or more specifically the Consumer Prices Index, are a good place to start. These are often around 2–3% annually.
This means that products and services generally rise by roughly this amount each year, something homeowners are familiar with through increases in utility bills, insurance premiums, fuel and the weekly shop. This inflation rate is what we would usually recommend as a basic price increase included in livery contracts.
However, it is important not to fix this as an absolute figure. Both your running costs and inflation can vary depending on the economy, and a 2–3% increase may not adequately cover your rise in costs over a year. This is being experienced currently with the huge hikes in some bills.
In fact, due to Covid and other resulting issues, the government inflation rate is currently sitting at 5.5%.
Whilst this is likely to lower again as situations improve, it demonstrates why it is important to calculate and review your costs regularly, and certainly before any price increase.
Small Increases Can Make a Big Difference
Even a small price increase for each client can have a beneficial financial impact for your business.
For example, even a £5 per week increase in livery charges (obviously the percentage and actual amount will depend on your livery fees) would generate almost an extra £220 per month on a 10-box yard to help towards running costs.
Price increases should not be exclusive to livery charges. Think about increasing prices across your full range of services, from livery to instruction and facility hire, as well as ad-hoc services such as holiday cover and exercise.
Our Top Tips for Price Increases
Calculate Your Costs: Do not simply assume how much you need to increase your prices by. Properly calculate your costs to establish the amount required.
Put It in Writing: Notify your clients in writing, explaining the increase concisely and stating what the new price will be and when it comes into effect.
No Need to Explain: You do not need to provide a lengthy explanation or a breakdown of your costs. Simply explain that the increase is necessary to ensure you can continue offering the service expected by your clients.
Don’t Panic About Losing Liveries: You cannot hold off increasing prices simply to keep clients happy, as ultimately you will be the one losing money. Empty stables will fill again, and more often than not, horse owners are understanding and accepting of price increases.
Put It in Your Contract: Including an annual price increase as a specific clause in your livery contract makes it much easier to implement and means clients know what to expect.
Do It Now: Too many yard owners spend a long time deliberating over whether to raise prices. The huge increases in costs over recent months mean that, for many, they can no longer be avoided. There is no good time to tell people that the cost of their livery is increasing, so there is no time like the present!
Help with Calculating Your Livery Charges
In 2019, as part of our Yard Owner Hub, LiveryList launched a Livery Charges Calculation Sheet to help yard owners better understand their running costs and everything that needs to be included when calculating the cost per stable.
This includes a detailed list of costs to consider, many of which are often overlooked but should be included in your calculations.
When working out your costs, it is also important to allow a contingency of around 10%. This will go some way towards covering interim price increases from your suppliers and can also allow for periods when you have an empty stable and are not earning any income.
The Livery Charges Calculation Sheet is free to access and easy to understand and complete, taking around 30 minutes if you have the necessary information to hand.
Often, even a quick glance through the sheet can make yard owners realise that there are costs they have been omitting, not least an allowance for their own labour!
The resource has been used by hundreds of yard owners as a useful tool, not only to compare their running costs with what they charge, but also to enable regular reviews and help keep their businesses sustainable and viable.
This, along with hundreds of other templates and resources, is available free of charge through the LiveryList Yard Owner Hub.
We also run a friendly and supportive Yard Owner Discussion Group on Facebook if you would like to share advice and experiences with like-minded yard owners.