I paid an additional 50 cents for my favorite lunch recently. I already felt it was a little on the high side. So, going forward, I will… continue to buy that lunch. This is due partly to the fact that in their shop was a sign politely explaining why they have made the price increase — and mostly because of its incomparable deliciousness.

Many businesses are facing the same pricing conundrums. Supply chains are missing links, sourcing has been challenging, deliveries unreliable and, nationally, there are nearly two job openings for every person interested in working. Still, it feels risky to raise prices. Customers have feelings, too, and they are watching prices rise all around them.

Pricing — especially for the small business — has always been a moving target. When my clients ask about price setting, I advise them to look at three elements:

1) What the market will bear, i.e., what are your competitors charging?

2) Your expenses, i.e., what do you spend to bring your product to customers?

3) Your needs, i.e., how much do you need to make for your business to be worthwhile?

Since there is not an exact formula, this is an important conversation to have with your business partners and/or a Small Business Development Center consultant.

Business owners will need to revisit this exercise periodically and, with inflation, now is a very good time to do it. If this exercise does point to a price increase, there are several good strategies to follow that will keep your customers coming back even after the new price reality.

Justify the increase. Let your customers know as much as you can about the increase in materials costs. If you aren’t comfortable itemizing the increase, you can share a percentage change over the last year (or two). The same applies to labor costs. In order to keep the same level of good services, you can share the percentage increase you have paid to keep or hire good employees. Similar explanations may be in order for transportation costs.

Sell the value of the increase. Explain to your customers that your commitment to quality products and services means you won’t compromise your standards with cheaper inputs. You can also remind customers of the expectations you will continue to meet, e.g. one-day shipping or 24-hour on-call service.

Hold firm. And remain empathetic! Always refer back to the justification and value of the increase. Make sure all the people in your customer service roles have the same talking points.

Give customers time to adjust. Make your announcement a few months before you implement the price increase, so they can adjust their plans, too. This is especially important in business-to-business enterprises. Your price increase may affect their material and labor costs, too.

Going forward, consider holding prices steady on the most popular items and focus increases on higher value or complimentary items. For example, a food business holds salads at $12 but raises prices on soup and bread. Once customers commit to the popular item, they are more likely to accept higher prices on complimentary items. Another possibility is creating attractive bundle deals around popular items, so the bundle is less than the separate items. People love deals, especially in inflationary times.

To help your business through these economic changes, you are welcome to call on the free services of your local Small Business Development Center.

Ann Swanson is the regional director of the Small Business Development Center at the Idaho State University's College of Business. Reach out at 208-282-4402 or swanann@isu.edu for an appointment. The SBDC is taxpayer funded to provide no cost consulting and low-cost training to any small business.