27/08/2021
Price Increases
During the last year there has been significant price pressures not least of which has been the disruptions to international freight that has resulted in delays, shortages and price increases. Even if you are not an importer it is unlikely that you are divorced from the impacts on your costs.
In our experience small business owners are notoriously poor at making sure they maintain profitability through regular price reviews and increases. We all receive regular notifications from suppliers about price movements, and each and every one of those erodes profitability.
Many owners are concerned that they will lose customers and sales by increasing prices, but the reality is that price is only one of the factors why people buy from you, and regular, professionally managed price increases have little effect on turnover but a big effect on profit. Remember that on a 50% gross profit, a 5% price increase is a 10% increase in GP and an even larger increase on the bottom line.
The price a business sells for is largely determined by profitability. The more profit, the more a new owner is willing to pay. By regularly reviewing pricing and recovering cost increases, or even increasing margins, you not only enjoy increased profit but also increase the value of the business on sale.
If you would like to discuss selling or buying a business, call the business sales experts at Company Sales and Acquisitions. We are there to help you get the best result when the time comes to sell.
