If you’re fortunate enough to be in a position to raise your prices, then Barbara Weltman at Big Ideas for Small Businesses has a few things you should consider.
She seems to think that a lot of companies are going to be raising prices in the new year, given inflation and the tight labor market (requiring higher wages). But it always comes with some anxiety: Raise them too much, and you could chase your customers away or drive them to your competitors.
“You need to determine the impact of elasticity on your pricing,” Weltman says. “This term means the measure of responsiveness of demand and supply of a good or service to an increase or decrease in its price.”
Some goods and services have more elasticity, she explains. The use of professional services may decline when prices are increased, while things like gasoline at the pump will maintain their demand despite price increases.
“Where do your goods or services fall on the elasticity scale? This is something you should determine so you know how much flexibility you have in raising prices,” Weltman says.
While there’s no set formula, she suggests considering budget, competition, customers and frequency before taking the plunge on price increases.