Why This Matters

Pricing affects nearly every part of a business. Prices that are too low can create heavy workloads without producing enough profit. They may also prevent the business from hiring, investing, or providing the level of service customers expect.

A thoughtful price increase can improve profitability without requiring the business to sell significantly more.

Common Mistakes

• Waiting until the business is losing money

• Copying competitors without understanding their costs

• Raising prices by an arbitrary percentage

• Keeping unprofitable customers out of fear

• Failing to communicate the increase clearly

• Offering discounts that erase the benefit of the new pricing

Harvest’s Recommendation

Review your pricing at least once a year.

Consider your labor, materials, overhead, market position, customer demand, and desired profit margin. Look at each major product or service separately because some may be much more profitable than others.

When increasing prices, communicate clearly and confidently. Customers generally respond better when they are given reasonable notice and understand the value they continue to receive.

Good to Know

A small price increase can sometimes have a larger effect on profit than a similar increase in sales. That is because additional revenue from a price adjustment may not require the same additional labor or operating expense as serving more customers.

When It’s Time to Get Help

Talk with a business advisor if:

• Revenue is growing but profit is shrinking

• You have not reviewed prices in several years

• Your costs have increased significantly

• You are busy but still struggling financially

• You are unsure which services are profitable

• You are afraid that any increase will drive customers away