More Small Businesses Plan to Push Up Prices in 2012
Pressured by higher operating expenses, more small-business owners plan to raise prices in 2012 than in recent years. But some could encounter resistance from frugal consumers.
A recent survey of small and medium-sized firms by PNC Financial Services found that 35 percent of business owners plan to raise prices, while only 7 percent expect to cut them. Of those intending to raise prices, 80 percent said they were doing so to avoid a "profit squeeze from higher costs."
But consumers have become accustomed to bargains in this still sluggish economy and will likely resist paying higher prices, small-business experts say. With consumer confidence slowly creeping back, people will "probably be buying more things as the year goes on," says Todd McCracken, president and CEO of the National Small Business Association, a nonpartisan advocacy group. "But they will be largely in the mindset of making prudent purchases and shopping around, which makes it really difficult to increase prices much."
Since the recession and financial crisis, many companies have been reluctant to boost prices. According to the PNC survey results, in October 2010, 24 percent of business owners planned to raise prices while 11 percent intended to lower them. And in April 2009, 19 percent of small businesses planned to increase prices--equal to the percentage that expected to reduce them.
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