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The technical term for what Sher is doing is in-market pricing discrimination, says Ronald Wilcox, associate professor of marketing at the University of Virginia's Darden Graduate School of Business Administration. Ten years ago it was rare for a business to base its prices on real-time inventory tracking, says Wilcox. Now it's relatively common for large companies but not so common for small ones. "The problem is that setting up the system where you have real-time inventory information costs a lot of money," he says.

Sher says he can't easily measure the impact of the price changes, since Bentley Publishing is still digesting three recent acquisitions it has made in the past two years. (Currently, its revenues are between $10 million and $20 million.) But he estimates that raising prices has already boosted his gross margins by as much as 3%. His margins will increase even more, he predicts, as he introduces more new prints at higher prices.

Just because Sher is willing to negotiate doesn't mean that he's a pushover, however. "You have to have some point where you say, 'That's my price," he says. Bentley's six salespeople still have to get Sher's approval before offering many discounts. And not all customers have jumped at the deals that Sher has offered them. "Some customers are more entrepreneurial and can react with an $11,000 order in three days," he says. "Other customers don't work that way."

Did the company lose any customers as a result of the price hikes? Out of 300 to 500 major customers, as many as 10 were on the brink, says Sher. But in the end, thanks to judicious discounting, only one of them jumped ship. "Price increases are tough. They're no fun for anyone," Sher says. "I don't want to say, 'Let's do it every year.' But I think we have to look at them every year at least. Small and medium businesses tend to be chicken about price increases. They leave money on the table."

Emily Barker is a senior staff writer at Inc.

Is the New Price Right?

Competition. Customers. Cost. In setting prices, the savvy CEO should look at all three elements, advises Thomas Nagle, coauthor of The Strategy and Tactics of Pricing. Competitors' prices are an obvious benchmark. But don't forget to add in the value that you're providing your customers. Figure out what makes your product or service distinctive, and be confident about charging for it.

As for cost, Nagle recommends a quick break-even analysis to make sure that your new prices will guarantee a satisfactory profit. After all, raising prices can lower revenues if enough customers decamp. How do you calculate how much sales volume you can lose without affecting your gross profit? Divide the percentage price change by the sum of the gross margin before the price increase and the percentage price change. So if you plan to raise prices 5% and your current gross margin is 50%, divide 5 by 50 plus 5, or 55. The result tells you that you can lose up to 9% of sales volume and still maintain your current gross profit. --Emily Barker

Hands On

Rock On: Want to inspire your star performers to hit the high notes every time? Run your company as you'd run a rock group. So advises Tony Lillios, who's done both. The CEO of 18-employee Speck Product Design, in Palo Alto, Calif., previously managed various West Coast rock bands, which he also played guitar in. In that career, Lillios found that the best bands let individual musicians develop their own approaches to each song. "When somebody says, 'Play like this,' you lose all the energy and passion and creativity," says Lillios. "It just doesn't have that magic." So in his current gig, Lillios encourages designers to improvise the same way, trusting them to make everything work together in the final mix. His refrain: "Be specific about general goals, but on a daily basis, let people do it their own way." That's the best way to guarantee a kick-butt performance. --Anne Stuart

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