| When you are running a small business you have to | | | | customers, they are likely to lower their prices. Your |
| keep a very close eye on costs. The reason for this | | | | new customers will then drift back to their original |
| is that most cost increases occur in a very stealthy | | | | supplier because they chose them when your prices |
| fashion. Unless you carefully graph your costs, you | | | | were similar. The alternative can be quite interesting |
| will be unable to see trends as they rise. The effect | | | | because if you raise your prices to match those of |
| of this is to erode your net profit without you | | | | your competitor, there can be a benefit. If there are |
| knowing it until it is too late. | | | | no alternatives, you and your competitor will probably |
| Raising your prices is a seductive way of increasing | | | | keep the customers that you've already got and |
| your net profit because your revenue increases and | | | | enjoy the much larger profit. |
| your costs remain roughly the same. However, there | | | | Small businesses should have a strategy for collecting |
| are many pitfalls in lifting your prices. Obviously the | | | | data and information about prices. This can be carried |
| best time and the best way to raise your prices is | | | | out on a monthly basis but beware of seasonal |
| when and how you can do it without losing | | | | changes. Sometimes prices will rise just before a |
| customers. | | | | holiday, sometimes they will fall just after a holiday. |
| First of all, consider the opportunities that your | | | | Some of your products and services are likely to be |
| competitors provide for raising your prices. Whenever | | | | price sensitive. In other words, sales are made to |
| they raise or lower their prices, there seems to be | | | | people who price watch and are resistant to price |
| an opportunity for you to increase your profits. | | | | rises. Other products that you carry may not be |
| Regrettably, it's not quite as easy as this. | | | | price sensitive to the same extent and pricing has |
| Unfortunately many small businesses don't take | | | | little effect on sales. It is a very good idea to analyze |
| advantage of this opportunity because sometimes | | | | your products to understand which ones are price |
| they don't find out about it. Sometimes small | | | | sensitive and those that are not. |
| businesses don't lift their prices to match those of | | | | The secret of raising prices is timing and price |
| their competitors. They hope to take customers | | | | sensitivity. It pays to study the market, interview |
| away by offering a lower price for similar products | | | | customers and prospective customers to gain their |
| and services. | | | | impressions. This market intelligence can help you to |
| There can be problems with this strategy. If you do | | | | maximize your profits. |
| manage to acquire some of your competitors | | | | |