This week the federal reserve raised interest rates again making them the highest they have been since 2008. The President just directed the US trade representative to level tariffs on about $50 billion worth of Chinese imports; this is in addition to the steel and aluminum tariffs recently imposed. If you use steel in manufacturing, the prices have already gone up.
Are you raising prices, too?
Here are some reasons to do so:
The whole country is talking about prices going up. Yet, business is good, and consumers are spending.
This is the first time in 10 years you won’t feel like the only one In your industry that is raising prices.
Your profits may have been affected by price increases from vendors that you couldn’t pass on in the past. You can now bring them back to historical averages.
You can expect to see price increases shortly from suppliers, and with the tight labor market, wage increase demands from your team. Get ahead of it. Good people are being poached right and left. You need a more cash to pay them.
Here are some reasons not to to raise prices:
The tax reform of 2017 is supposed to benefit business more than about 95% of individuals. We won’t know this for real until we pay taxes in 2019, but there could be a backlash against business. Be sensitive.
You may be able to use holding current prices as a strategy to gain market share from competitors. If your profit margins are high, think about targeting a few good potential prospects who have received increases from your competitors. Be careful here – if you don’t add value too, this could lead to race to the bottom, so just pick a few.
You may lose some customers. Usually, they will come back.
If you are going to raise prices, be smart about how you do it. Some companies are implementing 3-5% across the board increases. Others are targeting certain parts of their products or services to raise while holding others as is.
There is no universal right answer to this. This week, get your executive team together in a strategy meeting to discuss pricing. This issue is not going away.