First, determine if you need to raise prices in the first place. Obviously, you’ve had your eye on your profit margin and you start to see costs eating into your revenue. It is important to see if these rising costs are long-term or short-term. If they are short-term, you might want to temporarily eat the hike. Things like wage increases and inflation are probably more long-term. A price bump for an important component might make a price increase avoidable. You could, for example, find a new supplier. It is important to eliminate other options for improving your margin before you go with a price increase.

If you’ve examined all the factors that help you decide if you need to raise prices and you find that you do, there are a few ways to structure the hikes. The U.S. Chamber of Commerce has some good advice: You can raise prices across the board at the same rate for everyone; create a scheduled price hike (annually, for example); only raise prices on certain customers; offer choices like pricing tiers or packages (give customers the option of a larger increase paid over a longer period of time, or a shorter, one-time price increase; or get creative (by using variables like terms, billing, rates and incentives).

Once you decide on how you want to raise prices, you must communicate the increase with your customers. This is the hard part and where most price increases go terribly wrong. The most important thing you can do when you decide on a price increase is to be completely honest with your customers. Don’t sugar coat it. Talk to them. Especially in the current economy, reasonable customers are going to understand the need to increase prices since most of them have probably had to do the same themselves. Everyone understands and is experiencing the same inflationary pressures.

Don’t delay having a conversation about price increases. In fact, it is a good idea to get ahead of it if you have time. According to Hubspot, there are marketing and sales advantages to announcing a price increase well in advance. Not only does it give customers time to adjust their own budgets, but you can use it as an opportunity for upselling. Consider offering to extend contracts at the current rate, encouraging on-the-fence prospects to sign before the increase or running an end-of-year “sale” based on the lower prices.

If you are a manufacturer, make sure you give your dealer community plenty of time to prepare for price increases. Dealers are in an especially tough place when it comes to price hikes because they probably have projects in process that will be affected. It’s a tough conversation to go back to a customer and tell them they will have to pay more for a project they already budgeted for.

If you are a dealer, it is a good time to access the manufacturers you are working with. If they aren’t communicating with you about pricing in a timely way, perhaps it is time to find another manufacturer to represent. If they don’t respect you enough to discuss the need for price increases, they probably aren’t worth doing business with in the first place.

So there you have it: A blueprint for doing something none of us ever wants to do — raise prices. Keeping your customers well informed and being completely honest with them will go a long way toward keeping them in your corner when it counts.

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