Almost everywhere we look, we see higher costs. The cost of gasoline, for example, has increased dramatically compared to previous years. Labor costs are skyrocketing as the workforce shrinks and demand continues to increase. Raw material costs have seen large increases as the global supply chain struggles to work its way out of a major pandemic-related disruption. Food costs have jumped.

We often feel helpless when economic forces out of our control wreak havoc on our budgets. This is especially true if we operate our household budgets on a relatively fixed income from our salary and other sources of income. If an individual is unable to command a higher salary to cover the increased cost of everyday living, there is a loss of buying power. Many are feeling this loss right now and don’t have many options to counter it.

However, businesses have a solution that individuals don’t have: to raise prices. If your starting pay increased dramatically this year and field labor is your largest cost item, you have to raise prices or suffer a loss in gross profit margin. But wait, there’s more. If your starting pay increased, you probably had to adjust all of your field labor rates, so the labor cost increase was even more significant. And if you increased all of your field labor rates, you probably increased the salaries of your frontline managers. But wait, there’s more.

Going back to the individual’s options, one of the options for a salaried person is to jump ship and go work somewhere else where there will likely be a nice bump in salary. Many employers are losing good people right now because of this reason. So, as you consider raising prices, you may also want to factor in salary increases for all of your key people, regardless of their position in the company.

If everyone is getting a “nice” bump in pay, and fuel has increased by a massive amount compared to last year, and the cost of equipment, materials and everything else you purchase has spiked, you have no choice but to increase your prices. The questions then flood our minds. How much of an increase will our customers accept? What will our competitors do? Will we lose good customers if we increase our prices?

The reality is that your customers are living in the same world you are. They’re paying a lot more for gas, food, clothing, etc. They’ve been hit with large cost increases in their business just like you have. They probably just increased their prices also. So don’t be scared. Your customers are expecting you to raise your prices. Why wouldn’t they expect it?

If it’s been a while and you’re not sure how to go about determining appropriate price increases to cover your higher costs, reach out to your accountant, financial advisor, or consultant for guidance. But don’t procrastinate or hesitate. Your local gas station doesn’t think twice about increasing its prices. The new field employee wasn’t shy about what they needed to get paid in order to join your team. Your favorite grocery store didn’t call you and ask permission before making significant changes to its prices. Don’t overthink this.

Now go forth.