Small business owners have a slim margin for error. They need to implement the right pricing strategy to attract and retain customers. However, the market changes over time because of changing interests, new competitors, technological advances, and rising costs. It is important for you to know when to raise prices to stay competitive and profitable.

When is the ideal time to raise prices?

Demand Upswing

Your small business product pricing strategy may have worked because of the number of customers you get. The increase in demand may be a sign that it’s time to raise prices. Your team and partner company may be struggling to keep up with the high demand. In this case, it’s time to raise the prices of your products and services. This allows you to hire employees or outsource some of the work to boost profit and improve efficiency.

Rising Costs

As your small business grows, the costs of keeping your company may rise as well. You’ll need to keep or attract talented employees or freelancers, you might have to move to a bigger office, you’ll invest in the growth of your business, and other expenses. Your small business product pricing strategy may no longer match business costs. This situation is a good time to consider raising prices. The higher price will keep your small business profitable while paying company expenses.

No Price Increase for the Longest Time

You don’t have to raise product and service prices annually; however, if it’s been years since your last price increase, you might want to consider it. The needs of your small business may have changed or new competitors are disrupting the industry. In such cases, raising prices might be a solution. Increase the price of your products gradually. A sudden increase may result in fewer customers.

Market Readiness

The market may dictate the price of your products or services. You have to conduct small business product research, monitor trends that your target audience follows, the prices of your competitors, and possible market demand. Identifying these factors enables you to determine the readiness of your customers for a price increase.

The factors mentioned above allow you to determine if it’s time to raise the prices of your products and services. Start small if ever you increase prices; this allows your customers to budget appropriately. Communicate the increase to your audience and conduct research if raising prices is feasible and profitable.

After raising prices, you’ll need to adjust financial data entries in your accounting books. Let us at Robookkeeper do your bookkeeping for you. You can check out our virtual bookkeeping services to learn more about what we can do for you.