After 10 months of setting up my first business, I started thinking about how I could grow the business even more.

After some thought, I decided that the best way to do things was replicate what I was already doing and put the prices up. Simple! Raise your prices and double your income! Well, not quite.

My original business was based on low costs and simplicity. Let's imagine I was running running a bed and breakfast. It's cheap, just £30 a night for a double room. You can imagine the type of business model and the type of people that the B&B would attract - people looking for a cheap weekend away and purely basing their choice on cost, there's no customer loyalty so people can easily walk away at any time.

Now, to improve our business we could continue to do what what we're doing. The business is growing steadily and we're doing well but we want to increase profits a bit quicker. What can we do? Putting up our prices would turn away exactly the customers that we have been attracting up until now and this may put the whole business model at risk.

I decided to start a new business. The second business was exactly the same as the first one except that the prices were doubled. The idea was that customers in the middle of the market would be put off by the low cost of the first business and would be more comfortable paying more. The two businesses were kept completely separate, with different web site addresses and phone numbers.

My first business was offering low cost web sites where people paid just £250. This was perfect for small businesses who didn't have a lot of cash to spend on their marketing. This worked really well and I had lots of people signing up.

Once the income from this business was at a good enough level to live off of, I decided to set up a new business. It was really simple. I created a new business that offered EXACTLY the same service but I doubled the price of the sites. And you know what, it worked!

Some people are put off if something, in their eyes, doesn't cost enough. We subconsciously link price to value. With the first business, I thought I was offering a great service and people would be jumping at the chance to get a great service at such a low cost. And they did. What I didn't account for though was that some people were put off by this and wanted to pay more, simply because they thought that if something was that cheap, it couldn't be that good.

Some people assume that if they pay more, they are getting a better service.

Take advantage of that.

I don't mean in an underhand way. You are offering a service at a set price, whether someone decides they want that or not is their choice.

I bet you do it too. Do you sometimes pay £5 more for a t-shirt because of the shop that it comes from, assuming that the more expensive one will last longer? More expensive tyres for your car because you thick they will go further before needing to be replaced? It all depends on how much value you put on that item.

I set up a new web site, registered a new phone number and started offering web sites for £500. From anyone on the outside, they were two completely separate businesses - different name, different e-mail addresses and different telephone numbers.

It worked. I now do the same amount of work but charge double the price.

Both businesses are still running so I'm now covering the bottom (cheap) end of the market and the middle of the market. Who knows, maybe I'll set up a third business in the future targeting the top end of the market and charge £750 for the same amount of work!