Don't Wait Until You're Losing Money: When to Raise Prices

Running a business in itself can be stressful, not to mention managing all the changes happening in the U.S. today, including inflation, tariffs, and higher gas prices.  It can be overwhelming to keep up, and it can also be draining to the business’s finances.  Inflation is real; it exists in our day-to-day lives, from rising gas prices to higher grocery prices.  It exists in the business world, labor, payroll, inventory, insurance, rent, and software are just some of the typical expenses that go up every year.  Inflation can be a real drain on a business’s profits and cash flow and, if not managed properly, can destroy a business over time.  According to the Bureau of Labor Statistics' Consumer Price Index report on June 10, 2026, the U.S. inflation rate increased by 4.2% in May 2026, compared with the previous 12 months. 

Pricing is a very important business tool that can help fight inflation.  Pricing your products and services can be a science and a form of art, and charging the right prices can make your business work better, but charging the wrong prices can hurt your business if not right away, then over time. 

There are many businesses out there that have never raised their prices since they opened or haven’t raised them in several years.  A lot of business owners wait until the last minute, by which point profitability and cash flow are already suffering significantly. 

How Often Should You Review Your Prices?

As a good business general rule, most businesses should review their pricing at least once a year.  It doesn’t mean prices have to be increased annually, but they should at least be reviewed annually.  Reviewing the prices helps you determine whether they are still profitable and on target.  The more frequently reviewed, the better, but that can be tough for small business owners who may have to do it themselves.  A fast-growing business may need to review pricing more frequently, such as every 3-6 months.  If you don't raise prices when needed, it's like leaving money on the table.

Good questions to ask when reviewing prices

• Have we ever done a price increase? 

• When was the last time we raised prices? 

• If not recently, when was the last time we reviewed our prices? 

• How frequently does it make sense to review our prices? 

• What are our competitors doing? 

• How do your prices compare to the market? 

• What is your overall pricing and marketing strategy?  

• If you are going to raise prices, then how much and why? 

• Have our costs increased, and profit margins dropped?

• Are we delivering more value for our customers than we did a year ago?

Benefits of reviewing prices frequently

• The more frequently you raise your prices, the less of a shock it becomes to your customers.  For example, if you increase your prices by 2% over the next five years, this would not only raise prices by 10% over 5 years, but also compound on top of the original price increases from prior years.  See example below.

Year	2025	2026	2027	2028	2029	2030
Original Price	$ 100.00	$ 100.00	$ 100.00	$ 100.00	$ 100.00	$ 100.00
Increased Price (2% per year)		$ 102.00	$ 104.04	$ 106.12	$ 108.24	$ 110.41

• This would reduce the risk of shocking your customers down the road if you had to make a large price increase.  In the example above, a 2% increase over the next 5 years may be easier for your customers to digest than a 10% price increase in one year to play catch-up. 

  
  

Risks for price increases 

It is important to gauge the market for your business and how it affects the pricing.  If your business is in a highly competitive environment where pricing is a major factor, understand that a price increase may affect demand for your products or services, so you may need to adjust prices accordingly if demand slows significantly. 

Don't Forget to Communicate Price Changes

If you decide to increase prices, depending on the type of business you have, you may want to communicate it to your customers in advance and professionally.  An honest and clear explanation can help strengthen customer relationships.  

In Summary 

Pricing should never be something you think about only when profits are declining.  Regularly reviewing your pricing can help you stay ahead in your business and help maintain your profits and cash flows.  There are always risks in business in taking action, but there are also risks in not taking any action.