If you’re like many small companies, the answer is possibly “not recently”
I see so many businesses, myself included, who have genuinely wanted to support their customers through the last few years, and have shown that support by not increasing their prices.
The problem
But that’s a real problem because lots of your costs have been going steadily up regardless by more than inflation. Payroll costs, utilities, insurance, rates, professional fees and very likely your materials if you make stuff, will have been quietly creeping up.
So you may find that either your gross margin is being eroded, or you’re just not making as much on the bottom line. When I started in business 14 years ago, 13% and 14% net profit (after tax and dividends) was not unusual. Post-recession many of those same firms are existing on just 2% and 3% net.
So is it time to start being brave and put prices rises back on the agenda? I think the answer to that has to be yes but of course that’s easier said than done after a prolonged period of static prices. Some ideas to get prices up could be:
- Agree higher prices for new customers.
- Talk to your customers about the need to start increasing prices and give them notice of when that will be so they can plan.
- If you’re in engineering or manufacturing have a look at your labour charge out rate and see if you can increase it within your pricing.
- Focus on your biggest customers where it will have the biggest impact.
- Look at particular products or services to see what will make a difference.
- Benchmark against competitors – you may find you’ve got scope to increase your prices just because you’ve fallen behind them.
I’m sure you know better than me what your business and customers can bear but I would definitely recommend that if you haven’t put your prices up for a while then it’s time to seriously consider it – after all, any price increases will go straight to the bottom line.