As entrepreneurs, we have to make tough decisions on when to raise prices. We can only absorb price increases for so long. At some point, the cost you pay at the register must go up.

Which factors impact the cost of a good? Let’s look at six areas that affect consumer pricing:

Raw Material Cost Increases – plastic needs fuel to make it. How much was hand sanitizer per ounce when the pandemic first hit? That’s because the price of pure isopropyl aka rubbing alcohol surged due to it becoming scarce

Transportation Cost Increases – mainly due to an increase in fuel prices, which is associated with some type of imbalance in supply and demand where the price goes up when the fuel supply is limited

Container Cost Increases – partly related to transportation increases, but also congestion at ports; longer processing times due to things like COVID protocols

Carrying Cost Increases – storing the goods; as storage and alternative storage becomes limited, the cost to store goods will go up

Packaging Cost Increases – related to raw material cost increases; labor shortages due to pandemic; also labor cost increases

USD Devaluation – the price of imports goes up, which decreases the amount of goods an american business can buy; so the dollar doesn’t stretch as far as it normally would, conversely, if a foreign business wants to buy goods from the US, they are able to buy at a cheaper price

So If you’re a business owner, these factors directly affect you. How do they affect you? Inflation happens slowly and as it happens, it starts to erode your bottom line. So every now and then, you have to evaluate pricing to ensure you are not breaking even or losing money.

If you’re not a business owner, this info will help you understand what businesses have to go through before making the ultimate decision to raise prices.