Niche businesses & specialist equipment: How to manage price increases

Operating in a niche business sector can have its advantages, there are likely to be fewer competitors, for example.

However, if the business you are running requires the use of specialist equipment, then how can you protect it from being exploited by those who supply the equipment and in effect operate a monopoly? Here we consider the options that specialist businesses have when looking to bring in the equipment they need.

Build an Alliance

Companies who require specialist equipment, special printing utensils, cyclometers or oscilloscopes, for example, may best in the first instance, look to build alliances with the suppliers of the equipment. Doing this places them in a stronger position to negotiate on the price and in addition may serve to offer advanced warning if price rises are to occur.

It may also be the case that the alliance spawns other opportunities, collaborations and trade-offs are just two of the potential options that are worth discussing.

Offsetting the Price Increases

Another option, albeit a less attractive one is to offset the price rises by increasing the rates charged to customers who use your products or services – in effect passing on all or some of the increase to them. Although this will be unappealing to the customers, done will transparency, it is part of business, from time to time prices must be increased.

Look to Foreign Climbs

Looking to suppliers that are based overseas can also help you in this scenario. It may well be that you can source the equipment you need from them at a price that better suits you. There are, of course, issues here, such as, quality assurance, the equipment may not be as sophisticated or reliable and the potential problems that arise with importing expensive items.

If for no other reason, however, contacting foreign suppliers is a great idea as it may serve to give you some bargaining power with their domestic competitors – a little leverage can go a long way. Market competition is great, the lack of market competition is not so great.

Look to Commission a New Supplier

Looking to commission a new supplier may be another option. Companies are always looking for ways to expand and grow their operations and so it may be the case that you can hand them a golden egg. Highlighting an opportunity in any given sector may be welcomed with open arms, although bear in mind, it will take time for the company to develop and manufacture the goods and so this is a long term strategy.