For a while, predictions about inflation were everywhere but it was anyone’s guess as to how they would impact us all. Today? Inflation can no longer be ignored, with the U.S. inflation rate recently topping forecasts at 8.5%, the highest it’s been since 1981. Approximately 75% of small business owners are experiencing a hike in the cost of their supplies, and 31% are taking on debt to survive.
Still, perhaps most shocking of all is that only 40% are increasing their prices. If you’re among the 60% that hasn’t raised your prices, your business will incur the consequences. Keep reading for our guidance on navigating inflation and to try our quick and easy inflation calculator.
From One Business Owner to Another
Here’s my story. I own a public relations and writing business, and work with Finli as part of their content team. I’ve been self-employed for about nine years now and have gradually raised my prices over time as my experience has grown. But, I was not prepared for what inflation had in store for me. I was still charging the same rates and getting the same volume of work, but my income wasn’t going as far. I felt the squeeze of higher costs at the gas pump and higher prices at the grocery store, to name a few. Suddenly my formerly sufficient income was absolutely insufficient.
I struggled with the idea of raising my prices due to inflation, worrying about what my clients would think. But it became necessary. I did it, and you can too. Remember you need to pay yourself first. If you can’t survive in the status quo, nobody wins. It’s time to raise your prices, intentionally, thoughtfully, and accurately – and we’re here to help you do that.
Why Did You Set the Pricing You Did?
First, think back to how you initially priced your services when you started your business. What did you base that on? Did your family and friends weigh in on what they’d be willing to pay for similar services, and you essentially settled on the average? Did you perform market research online and see how other comparable businesses were pricing their services in your location?
These can both be useful methods for establishing prices at the start of a business, especially the latter, but pricing is often an art and a science. It can take years for a business to get its pricing right, and it’s helpful to understand why you landed on the starting point you did in order to figure out where you need to go next.
When Did You Last Raise Prices?
Over time, you’ve likely raised your prices. Some business owners, like myself, do this as their expertise grows, since their time and knowledge have become more valuable. Others raise prices when they need to hire new team members or buy more supplies. Still, others never raise their prices at all, leaving a lot of money on the proverbial table and leaving themselves in a lurch. So, where do you fit on the spectrum? Think back to when you last raised prices and by how much.
Introducing the Finli Inflation Calculator
Now, it’s time to get some clarity. Head over to our Finli Inflation Calculator and input your state, the type of services you perform, the rate you charge (per hour or per primary service), and when you last set that rate. Then, click the button and see what that rate should be today. It’s fast, it’s easy and it will give you solid direction for how much you need to raise prices to protect your margins – and peace of mind.
One last piece of advice: Be honest with your customers. It’s normal to be nervous about how they’ll respond to your increased costs, but the vast majority are likely to be very understanding. Even if some aren’t, you owe it to yourself and your business to be paid fairly, so keep that in mind.
Being a business owner always has its challenges, and inflation has become a big one. But, just like all the others, you can get through this and emerge stronger on the other side. We wish you all the best.
Need help getting started? Finli was founded to help small businesses instantly invoice, collect immediate payments, and more seamlessly handle their accounts receivable. Sign up for a free trial here!