Understanding the Impact of Inflation on Business Margins: The Importance of Adjusting Prices Annually

In 2017, if you sold something for $100, that was your only product, and you were running 20% margins as a business, if you did not change your price from 2017 until 2024, that $100 now means that your costs in that business have gone up by 20%, which means that your profit is now zero. And so if you feel like your margins continue to compress year after year after year, it’s usually because you’re not appropriately adjusting your prices. So to give you context, $79 in 2017 is the equivalent of $100 today. And so that would be like you going back in time where you had a 20% margin business and running it at a $79 price point rather than a $100 price point. And so you just like that eliminate all the profit in the business. And so you have to do the reverse of that because inflation is a compounding threat to your business that every year stacks on top of itself. And so if you’re not making three, six percent increases in prices, at least annually, you’re not even keeping up with inflation.