Expert Opinion: Could price increases be the best decision for your business?

IN Accountancy MD, Sarah Harkness, explains why small business owners shouldn’t fear price increases, and instead should use them as a tool for growth and clarity for their business.

With rising costs across the board—from higher national living and minimum wages to increased national insurance contributions—many small businesses are feeling the pressure on their margins. It’s no surprise that pricing is becoming a growing concern.

For business owners, the idea of price increases can be daunting. There’s often a fear that customers may react negatively or even leave altogether. But in many cases, holding off on a price increases can do more harm than good. It’s worth looking at the data behind pricing decisions—and what those numbers really mean for the bottom line.

Reframing the Fear Around Price Increases

Much of the hesitation around price increases stems from fear: the fear of losing customers, damaging long-standing relationships, or appearing too expensive in a competitive market.

But decisions driven by fear often don’t serve long-term business goals. Instead, it’s more productive to consider pricing through the lens of logic and commercial insight.

Understanding the 10% Rule

Here’s a practical example: for a business operating with a 40% gross margin, a 10% price increase could still maintain profit levels even if up to 20% of customers were lost.

Why? Because the increase in value per sale can offset a drop in volume. In other words, fewer sales at a higher margin can generate the same—or even more—profit than a larger volume at a lower rate.

It’s also worth considering which customers are most likely to leave. Often, those who are the most price-sensitive are also the ones who demand the most time and challenge pricing more frequently. These clients may not be the best fit long-term.

More Time, Better Clients

By stepping away from low-margin or high-demand customers, businesses often find they’re not just improving profitability—they’re gaining valuable time.

Time that can be reinvested in:

• Enhancing service for top-tier clients – Strengthen relationships and add greater value.
• Strategic planning – Evaluate services, pricing, and future direction.
• Growth activities – Marketing, networking, and identifying new ideal clients.

Ultimately, a price increase can be a catalyst for smarter, more sustainable business growth.

Moving Forward with Confidence

There’s no need to implement sweeping changes all at once. Consider trialling price increases with a select group of clients or on specific services, then measure the results.

It’s important to approach pricing as a reflection of value. Businesses that deliver excellent service and expertise shouldn’t hesitate to price accordingly. Doing so supports continued investment in quality and reinforces the strength of the client relationship.