Price is What You Pay, Value is What You Get
Inflation is all over the place if you have not noticed. Across the board, everyone is talking about the cost of products and services. If you are a business owner or leader, you may think that any sizable price increase of your product or service will result in lost customers. However, that does not have to be the case.
Price increases are expected right now, but that does not mean that you get into the price gouging game (remember, pigs get fat and hogs get slaughtered). Staying at least on par with market conditions is perfectly acceptable. However, how much should you increase your prices and what should you tell your customers/clients?
Below are some tips that I have found helpful throughout my career:
- To see if a price increase is needed, take a look at your competitors and see where you stand versus them.
- Review your costs and see how much they have increased. This could be a gauge of the amount you should raise your prices.
- Look at your own financials and see where your profit margins stand versus prior periods. Sometimes, your margins have narrowed. A price increase may be needed to get your company back to more normalized levels.
- Once you have settled on a price increase, make sure your entire team is notified of the increase and the reasons behind it.
- Let your customers/clients know directly and well in advance. A letter or email to clients with a follow up phone call to key customers is recommended.
Clear, concise and timely communication will be the best course of action with your team and your clients when looking to change your pricing.
Below are some additional insights on this commonly misunderstood topic:
- How to Communicate a Price Increase to Customers (uschamber.com)
- How to Raise Prices Without Losing Customers | SCORE
- Four Ways To Tell If You’re Ready To Raise Your Pricing (forbes.com)
Lastly, I will leave you with this thought as you think through your next pricing action:
“Price is what you pay and value is what you get”.
Other items of interest:
- Here are some great updates from Eventus Advisory Group
- What Employees and Employers Are Seeking From the Job Market | Paychex
- Escape the perfectionist trap with the philosophy of “wabi sabi” – Big Think
- The Great Recalibration Webinar (How Businesses are Changing Post-Covid: 09/27/22)
- Tax Forum Complimentary Two Topic Webinar – Working Capital for M&A Transactions AND Becoming a More Agile and Effective Leader (on24.com) (9/28 1-2pm EST)
Helpful Resource Pages
- Knowledge Center (eisneramper.com)
- Trout CPA Blog | Tax & Business-Related Topics
- News & Analysis | Littler Mendelson P.C.
- Insights, Analysis & Perspectives for Your Business | RKL LLP (rklcpa.com)
- NFIB Research: Data and Trends Affecting Small Business Owners | NFIB
- The Tax Warrior Chronicles (taxwarriors.com)
As always, please don’t hesitate to email myself (email@example.com), Andy Miller (firstname.lastname@example.org), Christian Miller (email@example.com), Erik Spurlin (firstname.lastname@example.org) or anyone in our office with questions or comments.
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