After two years of pandemic and the consequent drop in sales —even when it was believed that the moment of recovery had arrived— entrepreneurs and small businessmen have had to face a new challenge: inflation .

The increase in the cost of living is affecting world economies, not just Mexico’s. This forces business owners of all sizes to ask a vital question: how far can I increase my prices to absorb these increased costs? The key is to protect profit margins without losing customers.

With their great bargaining power, the large commercial chains are already applying classic strategies , such as renegotiating with suppliers , cutting personnel and operating restructuring . Small businesses have no such alternative, but thanks to their smaller structures they can opt for more ad hoc tactics. Let’s see what they are and pay attention to the recommendations of the experts.

Tomorrow, we’ll post a 7-step checklist so you can apply all these tips. Let’s get started!

#1. Check the costs

The first step is to assume that we do not have the option of increasing prices (later we will see in which cases it is possible). Then, review in detail each cost of the business – from production to administration and sales. Small business owners need to do this exercise on a regular basis, as resources are always in short supply and money leaks are inevitable . For example, a common mistake is to have excess stock , which leads to losses due to shrinkage or expiration of products, less availability of cash and an increase in the cost of money (for example, because you have to request bank loans ).

#two. Strengthens the profit margin

Related to the previous point, once you have reviewed your costs , the next step is to work to maintain or even increase the company’s profit margin . Take into account that in times of crisis, product and service providers are more interested than before in maintaining their customer base, so talk to yours and ask them for better prices and payment terms. With your business management system , generate a report to determine which are the best-selling and highest-priced products , Then, analyze how to further improve your value propositionin order to increase your cost to the customer and how to communicate that increase. In the case of products that sell less, check if it is time to remove them from your catalog.

#3. talk to your client

Do not make the mistake of increasing your prices without first talking to your client . Depending on the type of your business, analyze how you can start that conversation about how inflation impacts your operation and how you want to maintain the quality of your products and services. If you have few clients because, for example, you provide specialized services, ask them for an appointment in person or via Zoom. If your consumer base is broader, find out if an email marketing and social media campaign is better. Always keep a positive tone and highlight your commitment to customer satisfaction.

 #4. get creative

We tend to believe that to think of new ideas we need peace and quiet . But it is precisely in moments of crisis when we need to be more creative and quickly. Now that you’ve reviewed costs, areas of opportunity to increase profitability , and communication with customers, work on alternative products and services. The objective of these new lines is to satisfy consumer demands through options that offer a higher profitability margin (either because less expensive materials are used or, on the contrary, because it is a premium proposal). To work on this strategy, it is vital that you get to know your client in depth and that you analyze how their needs and consumption habits have changed in the past months.

#5. Always be clear and honest

In difficult times and bad news, consumers need to trust their favorite brands more than ever ; for this reason authenticity and honesty become so important. If you are forced to increase your prices, to change the size of your product presentations or to cut some features of your services, communicate these changes directly, without laps. Explain to your audience the reasons for these adjustments and highlight your vocation for always being the best option on the market . Be positive about the future and communicate all the changes that have been made in the company to be more efficient. Never try to cheat your customers, because in the end that will have a negative impact on the perception of your brand.