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Small Businesses and Price Increases | Fighting the Increase in Costs

Business owners are undoubtedly aware of increased prices. You don’t have to be paying attention to your supply chain to notice them when you can easily find them at the grocery store and the pump. But small businesses must navigate price increasing to continue turning a profit, so how can they do it? Luckily, there are a few aspects of your business that you can evaluate in the face of price increases.

Evaluating Labor’s Effect on Raised Prices

There is an immense rise in labor costs; in fact, these costs are currently at a 20-year high. These costs have hit small businesses the most, as many owners are currently raising prices to meet worker’s expectations. As the labor market continues to stagnate, small businesses will continue to suffer.

Fortunately, there are some potential solutions to labor’s effect on the increase in costs. Firstly, automation is becoming the go-to solution in some sectors. After a hearty initial investment for most automated systems, businesses can increase their output without the time and money it takes to acquire new staff. Outsourcing is also emerging as a sufficient alternative. In a global economy, and a remote world, cheap labor is much more accessible than ever before.

Materials and Price Increases

We’ve seen many economical shifts in the last few years, from the Pandemic to supply chain rebounding to the current situation in Ukraine. All these shifts have a detrimental effect on the cost of raw materials and your company’s financial health. Whether it’s metal, fuel, or food, nothing is exempt. This increase in prices has caused many companies to raise their own prices, hoping to curb some of the knocks to their margin.

For small business owners, it can seem like there are few alternatives to the materials they provide. It’s important to respond to this change somehow. While most businesses are raising their prices, there are some other options. These options might include limiting the number of products and services or finding alternative suppliers for the materials you need.

Monitoring Business Logistics

Supply chains present one of the best opportunities for small businesses to navigate rising prices. We’ve seen plenty of businesses switch to local supply chains or make efforts to shorten their existing ones. These steps can not only help you battle pricing increases, but also provide a steadier influx of what you need for your business to function. There are many ways for businesses to address supply chain issues, which may help mitigate costs.

Being Honest with Your Customers

At the end of the day, you may have to raise prices to combat rising costs. If this is the case for your business, the best thing to do is be honest to your customers. We’ve seen businesses announce their price increases and explain their need for doing so. In response, especially for smaller brands, customers have been understanding and supportive.

Regardless of how you choose to proceed, Falcon National Bank offers unmatched business banking. We provide expert commercial lending, including SBA loans to help your business thrive. When your business needs help from our team, you can contact us to get started.