Today's headlines are dominated by stories on rising living costs; real estate, electricity, petrol.
However, many small businesses are reluctant to follow suit, with some leaving prices for services and products unchanged for more than a decade.
![Melissa Jreige, founder of Reborn Hair, has had to increase prices due to a rent increase.](/web/20161229090639im_/http://www.smh.com.au/content/dam/images/g/n/q/7/x/z/image.related.articleLeadwide.620x349.gnq6xf.png/1458790725177.jpg)
Using technology to keep costs down
Melbourne business owner Alan Schwarz quickly embraced 21st-century technology when he founded B2B credit management business Alan Associates in 2003 and today he runs his venture via his smartphone and email thanks to a virtual private network.
He says his tech tools enable him to keep running costs low, which means he still makes profit even though he has never increased his service fees.
![Elyse Daniels, founder of Exodus Wear, has diversified her product range so she can keep fixed pricing.](/web/20161229090639im_/http://www.smh.com.au/content/dam/images/g/n/q/7/x/4/image.related.articleLeadNarrow.300x0.gnq6xf.png/1458790725177.jpg)
He has two clients; a manufacturing business and an accounting industry service provider and charges each a flat weekly fee.
Schwarz says turnover sits at $75,000 to $80,000 a year regardless of whether he works 10 or 60 hours weekly.
"My turnover is exactly the same today as it was 10 years ago," Schwarz says.
"Every Friday I email [my clients] a list of creditors and debtors and each week they pay me and it's simple, I mean my BAS statements only take 15 minutes to submit because they are exactly [the same] each quarter."
According to Schwarz, his clients use his services because of their long-term relationships.
"Both managers have now become friends and that does make it [raising prices] a bit difficult, too, once you have that social connection."
He says he has raised the frozen fees issue "once or twice" with his clients over the past 10 years, but nothing has changed.
"I am frightened that if I raise my weekly fees, they may doubt the value. All the work is done by VPN with me picking up the outgoings for my electricity, phone, internet, so even though phone and electricity has gone up I am still stuck with my prices from early in the 2000s [but] I don't want to rock the boat."
We have become so well known for this easy to remember price we have actually turned it into a unique selling point and have no plan to raise prices.
Elyse Daniels
Financing problems
Anne Nalder, chief executive and founder of the Small Business Association of Australia says "there is no blanket rule" on when to raise prices but she is concerned by a new Scottish Pacific survey that found 65.4 per cent of small business owners are financing businesses from their own pockets.
"The survey found 17 per cent are regularly drawing on personal funds and why that's relevant to this issue of price freezing is it shows just how many small businesses are really scraping the bottom of the barrel just to keep going," Nalder says.
"Yes, there are valid reasons to keep prices fixed for five years for certain businesses, I suppose.
"However there are all sorts of costs that keep going up and, given most small businesses operate with fairly narrow profit margins and face competition, leaving prices unchanged can only erode that profit margin and some small businesses are in a dreadful position because, even if they do raise prices, they are can only lift to a certain price point."
A price sensitive customer base
Catchy-named Gold Coast fast food outlet, Fuku Japanese last lifted its menu prices in 2011, according to manager Mary Courtney.
Courtney has worked for the 26-year-old establishment since 1995 and does all supplier food ordering, notably large quantities of chicken.
She says customer prices have increased over her 21 years with the business "but not by a lot".
The last time it happened, five years ago, a 10-20 per cent increase was applied across the entire menu.
Fuku's signature chicken teriyaki has risen from $5.50 to $10 (82 per cent) – less than double – in the past 20 years.
To put that in perspective, the median house price in Australia more than trebled between 1995 and 2015 from $129,500 to $475,000.
"You still get one out of 100 customers complaining but you try to explain that some costs – petrol, deliveries etc – have grown," Courtney says.
"Our prices are still less than half what you'll pay for a restaurant meal today."
Fuku is open daily in a downstairs food court in Oasis Shopping Centre in beachside Broadbeach.
Despite its touristy location, it depends on local employee and resident business and the enduring popularity of its famous chicken dish.
Courtney was unclear on Fuku's turnover but says chicken teriyaki represents about 70 per cent of all sales and the outlet sells about 150 portions ($1500) a day, which puts gross daily takings at approximately $2143 or about $782,000 a year.
Asked how prices can stay capped for so long Courtney says she works closely with three poultry suppliers and multiple vegetable suppliers to negotiate prices "but you do have to keep an eye on it" because her customer base is very price sensitive.
This year, a rental discount in recognition of minor renovations including painting and new menus has helped protect profit margin.
"We understand our customers do not like price increases ... but at the moment we are watching [the market] closely, maintaining relationships with suppliers, understanding prices do fluctuate depending on seasons but expecting that will even out when viewed on an annual scale so we can keep prices steady.
"Hopefully we don't see a shortage in chicken supplies as this is the biggest part of our ordering."
Transparency is key
Melissa Jreige launched women's hair salon Reborn Hair in 2013. The four-seat salon in Melbourne's inner north suburb of Thornbury has annual turnover under $100,000, she says, and this month increased haircut prices for the first time – by a flat 10 per cent – to counter the fact its commercial lease costs went up by about $1500 a month in 2016.
"We have not had a price increase since we opened but as commercial leases have gone up this year we have decided to cover this extra cost by introducing one transparent increase to our cuts, just enough to cover that lease increase," Jreige says.
"I have been determined to be very transparent with pricing so my clients can see the rise; it's the only way to do it."
Diversifying to maintain profits
Elyse Daniels founded her custom school leave jacket business Exodus Wear in 2009.
Today her Sydney-based national business sells about 2000 jackets each month and turns over more than $2 million.
Daniels reveals her profit margin on her custom jackets has reduced in recent years because of the weaker Australian dollar.
She says she "pushed back on suppliers" for a while but eventually decided to diversify and offer other complementary garments including leggings and crop tops.
It's meant she has maintained her original profit margin and kept her original advertised price of $90 flat including GST for 100 units of custom jackets.
"When we entered the market everyone else was about $20 cheaper but the quality was rubbish," Daniels says.
"We decided to adopt a different, very transparent pricing model and now we have become so well known for this easy to remember price we have actually turned it into a unique selling point and have no plan to raise prices.
"While our jacket margin is lower now than it was 12 months ago we have offset this by introducing special products with higher margins and our profit margin has come back in other ways."
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