We asked the President of The Great Game of Business, Darin Bridges if he thinks business owners should be raising their prices right now. His response, "hell, yes."
We've always had a saying at SRC. When the economy goes down — it's not the time to be asking for price increases. You've got to do it while the economy is going up. Everybody knows costs are going up right now — they're creeping up everywhere. We've heard the horror stories of the price of lumber, and surcharges keep emerging. It can be a scary thing, but within an inflationary environment, price increases are regular, and they're a crucial part of protecting margins.
So how do you protect margins? This is where the whole idea of engaging your employees in the business and the finances comes together. Educating employees on how they make an impact and getting them to take ownership in what they do is so important. When they're aware of inflation and how that impacts the company, they're able to monitor expenses in their area of the business to help stay on top of costs.
One man, one owner, one business leader can't do it all. You have to get your people to constantly and proactively find ways to reduce costs. Getting your costs under control and then going for the price increase will help maintain margins. You've got to be able to protect your margins to continue to fund growth, fund your people, fund the retention, and all the things necessary to see success for your business.
Having your whole team on the lookout for ways to protect margins, we truly believe, is one of the biggest benefits our clients are seeing right now. By engaging their employees in the business, showing them the finances, and educating them on the current situation, they are able to have that insight; they have that view of what's going on with their costs and where prices need to be increased because their people are bringing that information to them.<< Learn how to engage your workforce in the business and company finances to improve company performance. >>
Asking for a price increase. We know it's a difficult conversation. But think about it, if you develop that type of relationship with your clients, and you can give them a logical explanation of why you need to increase prices, most businesspeople are going to understand that. It's that conversation of going deeper — letting them know what you're dealing with and then working with them on the timing. That's the key. Nobody likes surprises, and that's where that forward forecasting, forward-thinking comes in. Give your clients some lead time so they can expect a price increase and get it passed through their organization. Talk of inflation is becoming more and more prevalent right now, so you've got to stay on top of your margins and where you should consider increasing prices.
So, how do you know when 2022 and 2023’s changed economic climate will impact your business specifically? ITR Economics strongly encourages their clients to be calculating and tracking their Rates-of-Change and to be using Leading Indicator inputs in their business strategy.
<<Get the ITR Trends Report to keep up-to-date on economic trends >>
In 2021, industrial sectors experienced Accelerating Growth, creating crunches on capacity, exacerbating concerns surrounding the labor market, prompting a willingness to purchase raw materials at higher costs than perhaps would have otherwise been desired.
Folks, we are moving into a period of slowing growth. It is still growth, but not at the pace that you’ve come to know and most likely expect.
You may want to take a moment to look at your industry’s Business Cycle Phase™ before putting “pen to paper” on those decisions.
“You must first fully understand your business’s relationship with your industry. Knowing how many months of Slowing Growth your industry will be in before you start to see slowing demand for your business is, of course, a must. Time after time, we see businesses overextend themselves because they’ve made what turned out to be a painful misallocation of resources at the peak of the Business Cycle. Not knowing that a shift in the cycle is approaching leaves you vulnerable to unnecessarily spending cash when perhaps you should have been conserving it,” says Kimberly Clark, Vice President of Sales and Marketing at ITR Economics.
So, how do you know when 2022 and 2023’s changed economic climate will impact your business specifically?
ITR Economics strongly encourages their clients to be calculating and tracking their Rates-of-Change and to be using Leading Indicator inputs in their business strategy.
<<Get the ITR Trends Report to keep up-to-date on economic trends >>
After watching your business post stronger sales performance than perhaps was expected over the course of this past year, you may be tempted into thinking linearly and projecting an equivalent performance for 2022. We at ITR Economics caution against this. Here are some other strategies to consider:
To help get you started, The Great Game of Business has partnered with ITR Economics to give you foresight into coming trends in US industrial activity through 2023.
Here is a forecast article by ITR Economics to give you a head start into your strategy development. We encourage everyone to read the article and incorporate this thinking into your 2022 and 2023 strategy planning.
“There is no bad phase of the business cycle,” says Kimberly Clark. “You simply need to know what is coming so you can position the business appropriately and maximize your profitability in any phase. That’s what we do. We help businesses create a roadmap of coming turns so their executive leadership team can build and execute the right strategy at the right time.”
Why we need to be smarter than ever about looking ahead and doing everything we can to protect our profit margins—including raising our prices.
Are you ready to start engaging your employees in your business? Learn how to get your entire organization working towards the same goals at our next workshop!
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