Chances are, you are starting to notice some rising expenses in your home business do, in part to the impending recession. Transportation costs, shipping rates, supplies, and other items are going up and they are likely costing you more and that takes away from your bottom line. As a new or relatively new business owner, however, you may feel reluctant to raise your own prices to cover those growing expenses. But, passing on some of those rising costs may be just what you need to do for the health of your business.
If you have a business where you ship and mail products, when shipping and mailing rates increase, you have to decide whether you will pass that increase on to your customers or work the increase into your overall prices or not. A sound business practice is to evaluate the overall effect that a price increase will have on your business. Chances are, the customers will not balk at a fair increase in shipping prices since they understand that the rates have gone up for everyone. Other expense increases, however, can be harder to justify.
If you are noticing that rising transportation costs are affecting your business operations, what can you do BEFORE you raise prices? There may be things that you can do to cut back prior to passing on the expense to your customers. Can you use alternative transportation or change providers? Can you cut back on your own use in order to trim costs? If you have tried all other cost-cutting measures and it is still costing you more, then you may need to raise your costs or add a fee or surcharge in order to recoup what is being lost.
The reality of raising prices is that you just might lose some business and it costs money to replace that business. Generally, you can replace what is lost and I think that we have to make the healthiest decisions for our businesses regardless of whether we are going to lose a customer or two. If you try to stay fair and are prudent with your price raises, then it is reasonable to pass on the rising costs. As long as you are prudent and keep an eye on all aspects of the business and do not leap into radical price changes, you should be fine.
See Also: the MONEY Blog