Setting next year's prices

There are two ways to run pricing. One is to review it every year on a schedule, as a normal part of planning. The other is to leave it until margin pain becomes undeniable and then make a large, awkward change.

Most small businesses do the second, and it is worse in every respect — bigger increases, more customer resistance, and years of absorbed cost inflation in between.

Start from what your costs did

Before any judgment about what the market will bear, work out what standing still requires. Take your main cost inputs, weight them by their share of your cost base, and you have the increase that holds your margin flat.

That number is the floor, not the answer. It is what you need simply to be where you were. Whether you can take more depends on your position, and whether you should take less is a deliberate investment in share.

Do not move everything by the same percentage

A uniform increase is the least sophisticated option and usually leaves money on the table. An annual review is the moment to reprice differentially.

• Your strongest products — the ones customers ask for by name — can usually take more than the average.
• Your thinnest margins need more than the average regardless, because a 4% increase on a 12% margin is a third of the profit.
• Small orders are where most businesses lose money. A minimum order value often does more than any rate change.
• Legacy pricing — customers on rates set years ago and never revisited — is where the largest single gap usually sits.

Give it a date and make it boring

The single most useful change is making price reviews predictable. A published annual date turns each increase from a negotiation into a policy, and customers who expect it in January argue about it far less than customers surprised by it in June.

Announce in November for a January effective date. That gives sixty days of notice, lands before the new year's budgets are locked on the customer side, and gets the conversation done before your own busy season.

Decide the concession in advance

Someone will push back. Deciding beforehand what you will and will not give is what stops the increase unravelling one customer at a time.

Pick a single concession — a phased step-up, a longer grandfather period for your largest accounts, holding the rate in exchange for a volume commitment — and hold everything else. What you must avoid is a different outcome for each customer who complains loudest, because that is the arrangement that becomes impossible to defend when they compare notes.

Then check what actually happened

In March, split the revenue change into price, volume and mix. That tells you whether the increase stuck, whether volume moved, and whether customers shifted to cheaper products.

Do it every year and you build the only pricing intelligence that matters: evidence about your own elasticity. Most owners believe their customers are more price-sensitive than they turn out to be, and the only way to find out is to have tried it and measured.