You raise a good point. IIRC because I cant find anything online to back up what I'm going to say next, during the height (or bottom of ) the 1990's recession, the word "recession" was used around 12-14 times per days in the Daily Mail, a separate university study showed, those companies that continued their advertising & marketing like activities or increased it survived the recession in the main. Those that reduced their advertising and marketing activities were less likely to survive.
Its common sense yet bosses dont do the common sense thing in some instances and do things like sack some of the sales staff.
Of course there are other factors which can also shelve a company, if one happens to be in an industry & category that the banks want to rein in lending with, like the bike dealership industry, that can knock you back as well, hence the mention of other factors.
Anyway I would argue, the boss needs to decide what do they want to do currently? Expand in terms of take on more staff or become more profitable?
If they want to become more profitable, put up prices but only if you expect to lose zero or x% of your sales though. The gamble/risk is if a business loses too much custom when the prices go up. Durham University with fsmed.org (long since gone) did a purple credit card size ready reckoner back in the 90's which explained the %'s to increase profit.
Eg Cutting Prices
% that sales must increase to maintain current gross profit.
As an illustration, a company achieving a 40% gp which cuts prices by 10% will need to generate 33% additional sales before starting to improve on the pre price cut trading position.
A company achieving 40% gross profit which puts up prices by 10% can afford to lose 20% of their sales before they start to see any deterioration on their trading position at the old lower price. In other words if you dont lose any sales you have just increased your profit with minimal change and cost to you!
I've attached a rich text document which has the %'es in the ready reckoner format which might make it easier to understand. I guess the bottom line is, who wants to take the risk and put prices up?
If sales remain constant, then profit will increase, sure customers might moan, but thats just part of business. We see bigger businesses doing this right now, but they have mixed this up a bit more by doing things like offer smaller (portion) sizes of their product for the same money a little more devious but its happening.
Of course other avenues should be looked at, like are all staff engaged in productive activity or can the work environment be more streamlined. Can processes be speeded up or got rid of in some cases? Some things are cheaper to outsource as well.
If someone wants to grow then I would suggest they look back at what a startup would do today.
What activities & practices would they be engaged in to grow?
Like computer programming, one should break the task down into smaller more manageable tasks which can help to make targets/mile stones easier to calculate as well. It also makes tracking the progress over time easier and also gives one a business plan to work to which alot of companies tend to lose sight of as they get bogged down into the day to day running of things.
Its also worth having some contingencies thrown into the plan. Why? Because people think better when not under stress so if a plan exists before the problem, the problem is less, by virtue of already having a plan to deal with the problem. Inversely people dont think straight when under varying degrees of stress which can be caused by problems, hence the old adage "go to bed and think on it".
Anyway the attached will give people an idea of how much they can put up prices by and what sales% they can afford to lose before their trading position gets worse.