More than half of businesses are planning to offset rising prices, according to a study by ICAEW.
53% of firms have seen input prices increase over the past year but less than half are willing to absorb the costs.
Businesses cited the following reasons for rising prices:
- rise in raw materials (35%)
- cost of services (29%)
- other reasons, such as the price of labour and changes to exchange rates (30%).
More than half (54%) are planning to offset input prices in the next 12 months. Those planning to offset rising prices intend to do so by:
- increasing prices (82%)
- finding cheaper suppliers (48%)
- revising product specifications (31%)
- reducing headcount (27%)
- planning investment (14%).
Stephen Ibbotson, director of business at ICAEW, said:
“Businesses are facing pressure from the fall in sterling and rise in commodity prices which together have driven up prices. Whilst many have sought to protect customers from those rises by absorbing the costs that is no longer sustainable.”
Pricing your products
Most businesses are planning to increase the prices they charge customers in order to absorb costs.
If you’re looking to increase the price of your products or services, it’s important to find a balance between quality and profit margins.
Some things to keep in mind when managing costs:
- the market – know how much customers will pay and competitor charges
- pricing strategy – what’s the most suitable strategy for your product, i.e. cost-plus or value-based?
- internal/external costs – working out direct costs, variable costs, fixed costs.
Contact us today to discuss your business planning.