When Was the Last Time You Reviewed Your Prices?

When Was the Last Time You Reviewed Your Prices?

For many small business owners, pricing is something they set once and rarely revisit.

But your costs don't stay the same.

Wages change. Rent increases. Supplier prices go up. Insurance, software subscriptions, fuel and other operating costs can all affect what it actually costs to deliver your products or services.

As summer winds down and businesses prepare for the fall, August can be a good time to take another look at your pricing.

Your Costs May Have Changed

A price that worked a year or two ago may not provide the same profit margin today.

Take a look at some of your key costs:

• Employee wages and benefits

• Materials and inventory

• Rent and utilities

• Insurance

• Software and subscriptions

• Professional fees

• Shipping and delivery

• Marketing and advertising

Even small increases across several categories can have a meaningful impact on profitability.

Revenue Doesn't Tell the Whole Story

It is easy to look at higher sales and assume the business is doing better.

But if your costs have increased faster than your revenue, your margins may actually be getting smaller.

For example, a business could increase its sales by 10% while its direct costs increase by 15%. The business is selling more, but making less on each dollar of sales.

That's why reviewing your gross margin and profitability is just as important as looking at revenue.

Before You Change Your Prices, Look at the Numbers

A pricing review doesn't necessarily mean increasing every price.

Start by looking at your financial information:

1. Which products or services generate the highest margins?

2. Which ones take the most time or resources to deliver?

3. Have your costs increased since you last set your prices?

4. Are some customers or services significantly less profitable than others?

5. Are your current prices still aligned with the value you provide?

Your bookkeeping and financial reports can help answer these questions.

Think About Your B.C. Market

For B.C. businesses, pricing decisions can be particularly important when operating costs vary significantly by location, industry and season.

Whether you operate a professional services business in Vancouver, a trades business in the Interior, or a seasonal business in a smaller B.C. community, understanding your actual costs is essential to setting sustainable prices.

And remember that sales tax is different from your selling price. GST and, where applicable, B.C. PST collected from customers should not be treated as business revenue.

Don't Wait Until Your Margins Disappear

You don't need to make major pricing changes overnight.

But regularly reviewing your costs and margins can help you spot problems before they become serious.

August is a good time to ask a simple question:

Are we charging enough to make our business sustainable?

At Ampowro, we help Canadian and B.C. businesses understand their numbers through bookkeeping, financial reporting, payroll support, GST/HST assistance and business advisory services.

If you want a clearer picture of your margins and profitability, schedule a call with Ampowro and let's talk about how we can help.