Responding to suppliers price increases


Suppliers’ price increases should not be taken lightly by small business owners.

Regardless of whether the increases are expected or not, a failure to respond to them appropriately can harm the small business by raising operating costs to potentially unsustainable levels.

When the subject of a price increase has been broached, small business owners can:

• Discuss with the supplier the factors motivating the increases, and whether there are other ways for the supplier to contain its costs and minimize or avoid an increase. In this scenario, the small business owner partners with the supplier, helping to brainstorm mutually beneficial solutions to the challenges the supplier may be experiencing.

• Shop around for other suppliers that are cheaper or offer more value for money even if they charge similar prices. The small business owner can then either use this information to negotiate more favorable terms with the existing supplier or switch to a new supplier they have discovered. If the latter, the small business owner can attempt to secure fixed prices for a defined time period. If the increase proves to be inevitable, small business owners should insist on an adequate notice period (e.g. 30 days minimum) instead of being expected to comply immediately.

In order for this to be applicable, small business owners should make sure they are familiar with any agreements (written or verbal) that have been entered into with suppliers. If the small business owner ought to have anticipated the increase because it was part of the agreement, the supplier has every right to expect immediate compliance. Some suppliers are unscrupulous and attempt to enforce price increases retrospectively.

Small business owners should refuse to yield to such pressure, confident that they can always take their business elsewhere and do not have to accept blatantly unfair terms and conditions.

Price increases do not have to spell disaster for small businesses. By keeping a level head and not panicking, small business owners can identify opportunities to do things differently, benefiting their businesses in ways they may not have foreseen.


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