Training fees repeated

 Well inflation remains stubbornly high, and we are all going to have to get used to needing to negotiate higher fees/salaries to remain standing still.

I increased fees this time last year, and I have already booked in new rates for 2024 with some clients.

This is the new world we all have to get used to.  Even my window cleaner put prices up 20%.

After years of relatively low inflation, we are now in a second year of it being high, and consequently significant wage/cost inflation is going to happen.  We can pretend it wont, but the reality is that it has to.  This will mean added difficulties in agreeing fees/rates/prices with suppliers, but we should be getting used to this new normal.

Anyway, for new work coming in after September 2023, my rates are going up.  I imagine so are everyone elses.  Good luck to everyone on both sides of the table.

Training fees

  Sorry folks, but they are going to have to go up.

I am currently increasing rates where I work as a third party, and those training providers are going to be increasing rates too.

Generally there has been little fee inflation since the mid 2010s, but actual inflation was relatively low and so a slow deterioration in fee rates could be made up with an extra day or two.

We are not in that place now.

But training is also one of those areas where budgets are under pressure when times are hard (I always argue that Procurement and Sales training should be protected, but I am biased).

So, rates for this year and already agreed dates for next year are staying the same.

New enquiries are at higher rates starting tomorrow 1 September 2022.

If you are not doing the same now, you will have to think about it.  Yes, that does contribute to inflation.  But inflation can no longer be ignored.

Inflation and hard times

 Well, if you don't value your Procurement team now, when will you?

And of course your sales team, operational team and in fact everyone in your business.  But just at the moment your Procurement team are really key.

I'm not terribly good at noticing prices in shops (which tells you that I earn enough money to not be worried about every single penny, unlike too many other people).  But even I have noticed prices going up.  And not just by the nominal 10% or so that is the current inflation rate.

MacDonald's have increased the price of their cheeseburger.  But not by 10% but by 20% (from 99p to 119p).  And if you look around the supermarkets you will see they are far from alone.  Lots of products have broken past the psychological £1 barrier, and gone up to £1.20 or more.

Now this may well reflect real changes in supply conditions and the cost of materials.  I don't know.

But what I do know is that we complain more or less the same about a 20p rise as we do a 15p rise, or a 10p rise.

So sensible sales teams will take the approach that, having had prices held back for years by relatively low inflation, and with customers all expecting there will be inflationary increases, the thing to do is go large!

Why have lots of incremental, annoying price rises?  Go for one big one, and hope to get ahead of the game a bit and increase profits in the process.  If inflation is 10%, why not go for 20%.  Or 30%?  If you can't put up prices now, when can you?

And this is where your procurement team comes in.

We know that for manufactured goods the cost of materials is usually about half the overall cost.  So, if inflation is 10%, we should expect to see a 5% rise not 10%.  After all wages have not yet increased by much, so not all costs have gone up.

Of course, industrial prices are rising even faster than domestic prices (15%+) and I am not suggesting that suppliers can hold down prices for ever.

But as a buyer we should be testing and checking.  Understanding our supplier's position, but also expecting that prices will fall equally quickly rather than being a new baseline.  That prices have increased an appropriate amount, rather than more than is necessary.  Making sure suppliers know we are happy to have monthly price negotiations rather than one big rise.  Maybe some kind of quarterly or annual rebalancing as prices vary.  This is the time when we show our value to organisations.

And of course your sales team should be putting up prices.  Yes, that is how inflation rises. But eroding profit margins are not a good idea either.

Yes this does mean that PAWA Consulting fees will be going up to.  Book now to avoid the rush (as they say).