Much has been made over the past year about rising levels on inflation and the impact that has had on the cost of living for both families and businesses.
The Bank of England has a target rate of 2%, believing that low and stable inflation is good for a steady economy, but it has been much higher than that for quite some time now.
Recent jumps aside, there is generally a steady rise in inflation so that no one feels a major impact, incomes roughly rise in line with expenditure. However, if your business has not increased it’s prices in line with inflation then you may be feeling the pinch more than others as your expenditure increases but your own prices don’t reflect that.
The Bank of England has an inflation calculator that can be found here, which shows what prices from a particular year would cost now. So for example, if you charge £50 per hour for your services and you haven’t put your prices up since 2018, you should now be charging £62.40 per hour as the inflation over that period averages at 4.5% per year.
It is worth running your own prices and fees through the calculator to see if you have kept pace with the market. Also, if you think your input costs have gone up too much you can check to see if they have gone up above inflation.
If your business costs are going up it is a delicate balance of how much of that you pass onto your own customers. Not putting up prices will see your profits reduce, but putting them up too much may lose you business going forward.