Should Business Owners Be Raising Their Prices Right Now?
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, I 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. >>
Developing Transparent Relationships With Your Clients To Help Navigate Difficult Conversations
Asking for a price increase. I 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.
Where Should I Focus My Attention During An Economic Slowdown?
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 >>
ITR recommends considering these 3 things during an economic slowdown:
1. Know How Your Business Will Be Impacted
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.
- Have you set robust quotas for your sales team?
- Have you considered what your cash flow and bank covenants will look like if growth slows to less than half of what you experienced in 2021?
- Now is the time to make plans to widen your customer base by slowly taking clients off allocation or by letting them order from you once again. This must be done early if you wish to get ahead of competitors who will be chasing the same customers.
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 >>
2. Shift Your Thinking
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:
- Plan for rise in the overall US industrial sector, but at a slower rate.
- Use this time to focus on longer-term plans.
- Creative automation is increasingly vital to your success.
3. Key Strategies to Discuss Internally
- Focus on your most profitable products.
With demand slowing, focusing your sales team’s efforts on selling your most profitable products will provide support to your bottom line while top line sales targets are potentially more difficult to reach.
- Focus your sales conversations around why potential customers should buy from you rather than a competitor.
The conversation is no longer “Yes, we have capacity to take on your order.” Now, it is “Here is why you should buy from me versus my competitor.” Touting your “uniques” rather than operating on a transactional basis will help your sales team close more deals during Phase C, Slowing Growth. Your team must become more relationship focused.
- Focus on conserving cash.
Most businesses are flush with cash, and today’s interest rates are extremely low. Be sure to borrow as much money as you can to finance expansions, acquisitions, upgrades, and new products. Conserve your cash for when interest rates move uncomfortably higher. Let your competitors spend their cash now and then be unable to afford the higher cost of borrowing.
A Recipe For Success
- Know if your markets are headed for a recession or just a period of slowing growth.
- Know when this change in economic climate will impact your business.
- Know what standard business strategies will provide the best ROI during this specific quadrant of the Business Cycle.
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.”
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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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