Tackling price increases
Posted on 7th September 2022 at 10:06
As prices are rising all around us it seems like it’s inevitable that everything will go up including your own prices. But is now the right time to increase your prices?
Two-thirds of UK firms are expected to raise their prices in 2022 according to research undertaken by the British Chamber of Commerce. This research was conducted before the energy price increases so it is likely to be much higher now.
You may feel like holding back on putting up your prices as long as possible to keep your business competitive and so that your customers can afford your products/services, but this can sometimes have an adverse effect.
Customers are expecting price rises now and may not appreciate or realise that you are keeping your prices the same. Some may feel that your prices may have been high in the first place to be able to absorb the increases in supply chain costs and utility charges. Worse still you could harm the long-term viability or financial stability of the business by not acting soon enough.
Deciding on your price increase
To make the decision on whether to increase your prices you should look at several things:
• Your profits and how well your business is performing and whether margins are being squeezed
• Your sales and any forecasts to see where you are predicting you will be in three to six months
• Your supply chain costs and how much these costs have increased
• Your operating costs and how much these are increasing
Using the information collected above you can start to look at a forecast for the next six months to see how well the business will perform under increasing pressure and costs, and whether your margins are being squeezed too much.
Completing this exercise is not easy but is a very beneficial and needed exercise to ensure the profitability of your business and to allow you to plan appropriately and cost your products/services. You are not alone though as we are always there to support you whether that is through an informal discussion or a business review which can look at all of these aspects and help you arrive at a decision over pricing. Contact us today to see how we can support you.
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