External events, like supply shortages and inflation, make running a successful business even more challenging. In today’s inflation market, business owners can be forced to make decisions they’re uncomfortable with, especially in terms of raising prices. It’s not uncommon for business owners to feel guilty or fearful that raising prices may do harm to their business.
But sometimes, difficult decisions can become easier when you reframe how you view your decision making. Let’s look at a fictional but representative example of a business owner who struggled to come to terms with difficult decisions but managed to adjust with help from a professional Advisor Team.
$2 More
Bartolo Cortez, the owner of Bartolo’s Birria—a small regional chain of Mexican restaurants—received an email with the subject line, “Your order has been delivered.” He gathered a package from the front step of the very first location he opened 15 years ago. When he unsealed the package, his biggest fear stared him back in the face.
“Are those the new menus?” his wife and business partner Esmeralda asked.
“Yes,” Bartolo said quietly.
“How do they look?”
“Expensive,” Bartolo said with a heavy sigh.
Esmeralda glanced at a box of opened menus. “They look exactly like our old ones,” she said, confused.
“Two dollars more,” Bartolo grumbled, placing a new menu next to an old menu. “We went 15 years without having to raise prices once. Now everything is $2 more. What will people think?”
Bartolo and Esmeralda heard a knock on the door. When they opened it, Eduardo, a dedicated customer and longtime business advisor for the Cortez family, walked in.
“Are those the new menus?” he asked. “They look good.”
“I don’t think I can do this,” Bartolo said. “People are going to think we’re in trouble. They’re going to stop coming. They’ll find some place that’s cheaper.” He placed the new menu back in the box and closed it up.
“Bartolo, you know that’s not true . . .” Esmeralda began to say with exasperation.
“I thought you might say that,” Eduardo interrupted, opening his laptop and motioning Bartolo to sit next to him. On the screen, Eduardo had pulled up a simple line graph. “Do you remember this?” Eduardo asked Bartolo.
“The price of staying put versus the price of adjusting to the market,” Bartolo said flatly. “It still feels wrong.”
Adjusting to Outside Events
Over the next hour, while Esmeralda prepared to open the restaurant, Eduardo revisited everything that had happened to Bartolo’s business over the last 2 years to reassure him that he wasn’t raising prices for fun. He was protecting his margins and his business.
Over the last two years, the prices of food and labor had risen for Bartolo. When he realized that his five restaurant locations had begun to plateau, he reached out to Eduardo to determine what he could do to encourage the growth he had experienced in past years.
Eduardo built an Advisor Team to help Bartolo answer this question. First, the Advisor Team asked Bartolo if he were willing to source his food from a different supplier. Bartolo refused because he knew he could not find high-quality food for any less than what he currently paid, which his Advisor Team confirmed.
His Advisor Team then proposed that he consider reducing headcount in an effort to reduce overhead. Bartolo refused because he knew that it was his employees that made the diners’ experience special, and because he needed every last employee that he had to continue running the business well.
So, his Advisor Team showed him that he had two options remaining.
- He could raise his prices on all menu items by $2.
- He could expect to go out of business within the next 2 years.
“There must be something else we can do,” Bartolo would plead with Eduardo. But Eduardo and his Advisor Team continued to present the objective evidence: If he didn’t want to make changes to the food and his business’ operations, his only choice was to raise prices.
“So, which menus am I putting out today?” Esmeralda interrupted.
Bartolo looked wearily at Eduardo for an answer.
“You may not be able to control the economy,” Eduardo said, “but you can control how you respond.”
After a long pause, Bartolo looked at Esmeralda and said, “The new ones.”
Change Is Scary but Necessary
Bartolo experienced a fear that is common among successful business owners: the fear of changing something that had worked so well for so long. But successful businesses often require an evolution to address unexpected events. In Bartolo’s case, macroeconomic conditions forced him to choose among four options he did not necessarily like.
As a successful business owner, it can be easy to fall into the trap of refusing to adjust to new market conditions. But doing so can also threaten the long-term sustainability of your business. This is where an Advisor Team can be helpful because an Advisor Team can take a more objective view of what you must do to succeed and balance it against your company’s short- and long-term goals.
In Bartolo’s case, he did not want to do any of the things that his Advisor Team recommended at first. But when he realized that standing pat would do more harm than good, he began to reconsider what his options were. His Advisor Team did not force him to make decisions that he didn’t want to make. Instead, they used their professional analysis to show him the potential outcomes of the decisions that he wanted to make.
More specifically, if he did nothing to address how his business fit into the current economic market, his business would die. And though Bartolo knew it, he needed to hear it from someone else: If his business died, the good food, the good employees, and all of his good customers would disappear.
Bartolo’s Advisor Team helped him weigh the pros and cons of each decision to make the best possible choice he could make in the context in which his business existed.
You’re Not ‘The Bad Guy’
Six months after Eduardo visited the restaurant on New Menu Day, Bartolo and Eduardo met again for an overview of how the price increase had affected business.
Despite Bartolo’s fears, the price increase did everything it was supposed to do. Each restaurant location saw a slight increase in profit that it had not seen over the past 2 years. Bartolo’s loyal customers understood why he had to raise prices, and the worst thing Bartolo experienced from his customers was some gentle ribbing about how everything is more expensive these days.
“I’d rather pay a little more than lose you altogether,” was a common refrain from his most loyal customers.
But Bartolo’s gut was right: Refusing to compromise on the quality of food and the quality of employees was the right call for his business. His customers were both willing and able to pay a little more for an experience they truly loved.
Hard Choices Require Expertise
For many business owners, the business is more than a means by which to achieve financial security. It has subjective meaning. It’s a point of pride. And that often means that there’s potential for business owners to act irrationally when it comes to big changes to the business—because when you truly care about something, you will do anything you can to protect it, even if what you’re doing isn’t really protecting it at all.
In Bartolo’s case, trying to take a steady-as-she-goes approach would have done more harm than good to the business, even though his intent was to protect the business he built and loved over the last 15 years. Fortunately, his Advisor Team brought their expertise and objectivity to show him that while he may not be able to keep doing things exactly as he wanted, there were ways to protect his business, its value, and everything it meant to him without radically changing the structure and function of his business.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.