When Did You Last Increase Your Prices?
Business owners are usually very aware when their costs increase.
Suppliers increase their prices.
Wages rise.
Insurance renewals arrive.
Fuel changes.
Software subscriptions creep up.
But there is one number many businesses leave untouched for years.
Their own prices.
The Cost of Doing Business Changes
Imagine your costs increase by 5% but your prices stay exactly the same.
You may still be making sales.
You may even be busier than ever.
But your margin is gradually being squeezed.
Over several years, that can have a significant impact on profitability.
Being Busy Doesn’t Always Mean You’re Making Money
One of the traps growing businesses fall into is measuring success by workload.
The phones are ringing.
The calendar is full.
Staff are busy.
Revenue is growing.
Everything looks good.
But if your margin on each job has fallen, you may simply be working harder to make the same amount of money.
Why Businesses Avoid Increasing Prices
There is usually one major concern:
“What if we lose customers?”
It is understandable.
But keeping an unprofitable customer simply because they accept your old pricing is not necessarily good business.
You need customers who value what you provide at a price that allows your business to operate sustainably.
Look Beyond Your Competitors
Pricing should not simply be:
“What does everyone else charge?”
Your pricing needs to consider your own:
- Labour costs
- Materials
- Overheads
- Experience
- Capacity
- Risk
- Desired profit margin
Two businesses providing a similar service can have completely different cost structures.
Small Changes Can Make a Big Difference
You do not always need a dramatic price increase.
Small adjustments across hundreds or thousands of transactions can materially improve your bottom line.
The important thing is to review pricing regularly rather than waiting until margins have already disappeared.
Know Your Numbers First
Before changing prices, understand:
- Which services are most profitable?
- Which customers take the most time?
- Where have costs increased?
- What margin are you currently achieving?
- What margin does the business actually need?
Good pricing decisions are based on numbers, not guesswork.
The Bottom Line
Cutting costs has a limit.
Eventually, there is nothing sensible left to cut.
Pricing, on the other hand, is one of the most powerful tools available to a business owner.
If your costs have increased significantly but your prices have not moved in years, it might be time for a review.
PLH Accountants can help you understand your margins, costs and profitability so you can make pricing decisions with confidence.