15 May When should I increase my prices as a small business?
Are you asking yourself ‘when should I increase my prices?’ As a small business it is an important decision for you to make right now.
For some months, there have been reports of higher living costs for families, such as fuel, groceries, and general living expenses. As reported last week, inflation reached 5%. All of our costs have gone up as a business too!
Why do small business profits seem to reduce over these times, yet large companies seem to maintain profits?
When you break it down, most increases and contributions to inflation come from large multinationals who quickly increase their prices to maintain margin to protect profits and shareholders. They review the rise in costs of goods, transport, utilities and wages daily and immediately adjust where needed.
Working on your business
Small businesses are busy running their business. We talk about working in the business when you should be working on it. This means we may overlook increases in invoices and extra transport or fuel costs and absorb the higher prices. In most cases, small businesses are reluctant to increase prices for fear of losing clientele, resulting in loss of profit and long-term cash flow pain .
The reason people are in small businesses is because we are passionate about what we do. Small business fills a gap in the market, which results in long-term loyal customers. Customers that will understand the need for price changes.
If inflation has increased your costs, your small business needs to adjust your costs at the same rate as multinationals. Your customers understand that if the price of doing business increases, their morning cup of coffee or lunch will also increase.
Economists say the current interest rates will remain or increase and inflation may continue to rise.
Branding and marketing
If you have maintained your marketing and branding and have good relationships with your customers they will continue to support you. People will still buy that cup of coffee/lunch or new pair of shoes. Consumers will be more concerned, not about the price, but more so that they get the right quality product with the best advice.
This is where small businesses can outshine the larger companies. As a small business owner you need to back yourself and focus on giving the best service and product, and having great relationships.
If you fail to pass on costs your cash flow will be impacted, your profits decrease and you run the risk of making your business vulnerable.
So when are you going to increase your prices as a small business? It can’t be a matter of if, but when, and the sooner the better for your bottom line.
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