Increasing Prices Without Sacrificing Sales

Small business owner standing at customer counter


One of the most effective methods for boosting cash flow in your business is raising your prices. This not only widens your profit margins, but also generates the necessary funds to grow your business. Economic conditions can affect both personal and business finances, so it’s important to regularly evaluate your pricing strategies to ensure they align with industry trends. 

Crafting a Pricing Strategy

By conducting comprehensive market research, you can gain valuable insights into your competitors' pricing strategies and your customers' willingness to pay. Armed with this knowledge, you can develop a tailored pricing strategy that maximizes your profits without adversely affecting demand. Regardless of whether you opt to price below, at par, or above your competitors, there is always scope for a strategic price increase.

When your prices are set at a level that covers your costs, provides a reasonable return, and is attractive to customers, you know you're on the winning track.

Important Considerations Before Raising Prices

Before you decide to increase your prices, there are a few key factors to keep in mind to avoid alienating your customers with a significant price hike. Consider the following:

  • Convince customers of your value: Emphasize your unique selling points, such as excellent customer service, free delivery, or superior products, to justify the increase in price. By highlighting these benefits, you can ensure that your customers agree that your products or services are worth paying more for, reducing the risk of them turning to the competition.
  • Prioritize customer experience: Ensure that your staff is well trained, knowledgeable, and friendly and promptly address and resolve customer complaints. A superior customer experience can justify a higher price, as customers are often willing to pay more for exceptional service. Think about times when you would have chosen a more expensive option because you knew you would be treated well.
  • Assess demand: Evaluate your market position and analyze your competition’s pricing to determine if there is sufficient demand to justify a price increase.
  • Communicate with your customers: Be transparent about why you’re increasing your prices, demonstrating that you value their expectations and concerns.

When raising prices, consider gradually implementing the changes instead of enforcing a sudden and drastic increase. Additionally, focus on increasing the price of products that are expensive to source or manufacture, as this allows you to maintain the necessary cash flow for production while also conveying a higher quality to customers.

Making Informed Decisions About Price Increases

Let's use an example to illustrate the impact of a price increase. Suppose you currently sell coffee tables for $200 each, with a manufacturing cost of $50. This would result in a gross margin of $150 per table. If your monthly overhead amounts to $5,000, you would need to sell about 33 tables to break even.
gross margin calculation
Now let’s say the demand for your particular product is off the charts. Your marketing strategy has been successful and you’ve been able to outperform the competition, making you very confident that you can sell more than 33 tables. Because of the quality of your product and the time it takes to make each coffee table, you consider raising the price of each table to $250. You now would only need to sell 25 tables to break even. If you maintain the same sales volume of 33 tables, your profits increase from $0 to $1,600. This represents a significant boost in profitability.
Gross Margin Calculation

Price Increase Illustration

Fixed Costs Gross RevenueImagine the impact on your profit margins if you were able to sell more than your goal of 33 tables per month. In this example, the price increase to the customers would be relatively small when compared to the quality, the costs would remain the same, and the gross profit margin would continue to expand.

This increase in profitability will give you the opportunity to inject additional funds into your business. If your coffee tables are selling successfully, you may want to consider utilizing the extra resources to invest in state-of-the-art equipment, expand your facilities, or even bring on more talented staff members.

Clearly, increasing your prices can result in a significant positive impact on your overall profits.


To determine your pricing strategy, be sure to conduct thorough market research to understand your competition's performance and pricing. Engage with your customers and gauge their willingness to pay more for your product or service. Additionally, seek advice from other successful small business owners to learn from their tactics.

By strategically increasing your prices without losing sales, you can increase your profit margins, generate more cash flow, and position your business for growth and success.

Related Resources

  • Budget reports on a desk

    Budgeting and Forecasting for Your Business

    Here are a few questions that can help you get started on building a solid budget and forecast for your business. 
    Read More
  • Calculator on top of financial report

    Cash Flow Forecast Template

    Stay ahead of unexpected expenses by regularly monitoring your business's cash flow, allowing you to plan with confidence.
    Read More
  • Store owner handing bag to customer at checkout

    Customer Lifetime Value

    Use this template to calculate the long-term value of each customer, while considering acquisition costs and ongoing marketing expenses.
    Read More