Improving Margins Through Price Increases in 2026
In 2026, many Australian businesses are finding that "business as usual" is no longer profitable. Rising input costs, higher wages, and persistent inflation mean that if you haven't adjusted your pricing recently, your margins are likely shrinking.
A price increase isn't a "last resort"; it's a necessary move to ensure your business stays viable and can keep delivering quality service.
Work out your real margins first
Before changing a single price, you need to understand your current margins at a detailed level. Looking at your P&L as a whole can hide specific areas where you're actually losing money.
Use the standard formula for every product or service line:
Gross Profit Margin = [Revenue - [Cost of Goods Sold / Revenue ]] x 100
During the audit, look for:
Margin Creep: Where supplier costs have gone up but your retail price has stayed the same.
Low-Margin time-wasters: High-volume services that eat up labour but result in very little profit.
The 80/20 Rule: Find the 20% of your services that generate 80% of your actual profit.
Identify and Segment for Adjustments
You do not have to increase every price by the same percentage. Break your offerings into groups:
Core Products: Increase these minimally to stay competitive.
Premium/Specialised Services: These have higher "perceived value" and can often handle larger increases.
Unprofitable Clients: Use price increases to either bring these clients to a profitable level or move them on to free up capacity for better work work.
The Price Adjustment Process
Model the Impact: Calculate the "break-even" point. If you raise prices by 10%, how many customers can you afford to lose before your total profit drops? (Usually, the answer is more than you think).
Add Value First: Can you bundle a small extra service or improve your turnaround time to coincide with the increase?
Give Notice: Provide 30 to 60 days' notice for contract-based services. Being upfront builds more trust than a surprise bill.
Communicate the "Why"
Avoid apologetic language. Instead, focus on Value and Sustainability:
"To keep delivering the quality of materials and the level of expertise you expect, we are adjusting our rates."
"This adjustment allows us to continue investing in the technology and staff required to support your business."
Your margins keep you in business
If you don't audit your Gross Profit regularly, you are flying blind. Strategic price adjustments in 2026 are not just about "charging more"; they are about ensuring your business has what it needs to thrive and serve your customers for the long term.
Important Note:
The information provided in this article is general in nature and does not constitute financial or tax advice. This information has not been prepared taking into account your specific objectives, financial situation or needs. Before acting on any information in this article, you should consider its appropriateness to your circumstances and consult with a registered tax agent or financial advisor.
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