Moreover, consider the inflation rates of some of our trading partners:
Vietnam: 21%
Turkey: Almost 10%
Saudi Arabia: 9.6%
China: 8.5%
Rising prices are no less true here at home. So, again, what do you do?
You basically have two options:
1. Raise your prices to reflect the increasing cost of doing business, but risk losing customers;
2. keep your prices the same, keep your customers, but essentially take a pay cut in the process.
United Airlines (UAL Quote - Cramer on UAL - Stock Picks) has famously chosen option No. 1. The airline recently announced a host of new increases, for everything from fares to so-called "extra" baggage. I didn't think United could get any worse as an airline, but apparently I was wrong.
So clearly, the first option, to raise your prices in relation to increased costs, is fraught with danger. The risk is that customers, always on the lookout to save money generally -- and even more so these days specifically -- will simply decide to do business elsewhere.
So what about option No. 2: holding steady, hunkering down and keeping prices the same?
Doing that is very hard for me to recommend, too. Yet, it may be the safe play for small businesses these days.
Not only will holding prices steady allow you to keep your own customers, but it can also mean that you just might siphon off a few from the competition. Maybe not enough to offset the hit you will take as inflation rears its ugly head, but maybe enough to cushion the blow.
Steven Strauss
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