Pricing it Right

Inflation.  We hear it in the news.  We see it at the gas pump, at the grocery checkout counter and even in the fast-food drive-through.  We all feel the impact of this on us personally.

Are you tracking how inflation is impacting your business?  Does your company have a strategy for reviewing the price you charge for your products or services?  Are you afraid to increase prices because you are concerned with losing business and denting your bottom line?

Don’t fall into the trap of setting prices based on historical information with no plan to review your pricing.  It’s easy to talk yourself  into believing that your customers won’t pay more, telling yourself things like ‘that’s what the market will bear’ or ‘we’ll price ourselves out of that work’.  Meanwhile, costs of production (labor, materials, transportation, overhead) increase with profit margins, profitability, and cash flow suffering.

It’s no secret that input costs are ever increasing and now is the time you need to review your costs of doing business and look at how it impacts your profitability.  The truth is that you probably need to raise your prices - now.  So, accumulate your costs of production and add a reasonable profit margin.  Compare this to your pricing structure and make the necessary adjustments.

Also recognize that this isn’t a one-time exercise.  Commit to reviewing your pricing structure every quarter.  You will put yourself in a position to proactively manage your pricing based on your actual costs and targeted profit margin - you’ll see the benefit on your bottom line.