Raising Prices
Asking more for goods and services is another way to adjust cash inflows. “Businesses are very hesitant to raise prices when they don't have to,” said Conerly. “And they often get push back from their salespeople. But the fact is, buyers are accustomed to seeing price increases in inflationary times.”
Price changes must be carefully communicated. “Give the white glove treatment to tier one customers by reaching out and explaining how your costs are rising,” said Beaver. “Communicate to them that the price rise is only temporary.” One approach is to tell your most important customers that you are absorbing 20 percent of the price increases and passing along the other 80 percent. Another is to separate out any fuel charge increases from the delivery costs and explain you are only passing them along. “A company will have more leverage to raise prices if it has offered great service and maintained inventory.”
Above all, avoid delay. “Businesses are most successful at raising prices when they do so quickly,” said Anderson. “Customers are more willing to absorb increases during inflationary times when they can see it makes sense in the marketplace.” Waiting too long risks losing the opportunity, especially if inflation leads to a serious economic downturn. “No one wants to absorb a price increase during a recession.”
New Rules
Today’s unexpected return of inflation has changed the operating paradigm for businesses large and small. Te Great Recession of 2008 had sparked the habit of relying too much on just-in-time delivery of supplies to trim cash investments. Further, the recent willingness of customers to accept price increases was exacerbated by supply chain disruptions.
Now businesses must modify their cashflow management, inventory practices, and pricing policies to reflect both rising costs and supply chain disruptions. “Te booming economy of recent times has allowed companies to pay less attention to market developments and still be fine,” said Anderson. “But now in a time of inflationary price increases, they have to do better. Te job of managing is tougher than ever before.”
Nationwide, increases are running lower, due to normalization of wages in some industries. “In 2022 we're looking at 2.6 percent growth in the employment cost index, compared with 2.9 percent for 2021 and 2.6 percent in 2020,” says Hoyt. (Economists consider the “employment cost index” as the best measure of actual wage rates). Hoyt adds that “any risks to the accuracy of
those numbers is probably on the upside.” Phillip M. Perry is an award-winning business journalist with over 20 years of experience under his belt. A three-time recipient of the American Bar Association's "Edge Award" for editorial achievement, Perry freelances out of his New York City office. His byline has appeared over 3,000 times in the nation’s business press and he maintains a web site at
www.editorialcalendar.net.
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TPI Turf News July/August 2022
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