Rising tariffs don't shrink a company's profits; they raise your prices. That's the message personal finance expert Dave Ramsey delivered in a recent “EntreLeadership” podcast episode, where he explained why higher costs don't necessarily hurt businesses, but customers.

“Increased tariffs do not cost companies money,” Ramsey said. “They pass the tariff cost on to the customer in the form of higher prices. That’s basic econ.”

Raising Prices Beats Slashing Budgets

When business gets tight, many owners instinctively look for ways to cut costs. But according to Ramsey, that’s not the first place you should look, especially if you’re running a small service-based business.

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“I don’t look at what expenses there are. I look for revenue opportunities,” Ramsey told a caller named Cory from Fort Lauderdale, Florida, who asked what business expenses should be trimmed when margins tighten. Ramsey flipped the question: if costs are going up, and your profit margins are shrinking, you probably forgot to raise your prices.

“That means you did not raise your prices, and everybody else in your business raised their prices because they didn’t want their margins tightening,” he said. “Rising costs generally mean rising prices for the delivery. That’s true.”

He pointed to his own company as an example. Producing a hardcover book today is significantly more expensive than it was 10 years ago, thanks to inflation and rising material costs. So they adjusted.

“Hardback books are now $32. They used to be $22, and before that they were $17,” Ramsey said. “But that’s based on the cost of the production of the book and the soft costs it takes to develop and put out a book.”

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Tariffs? Customers Pay the Bill

The same logic applies to tariffs and other external cost increases. Ramsey argued that companies don't really absorb those costs. They simply raise prices.

“Companies raise prices equal to tariffs,” he said. “And so they pass the tariff cost on to the customer.”

Ramsey also added that many small businesses already operate on lean budgets. He acknowledged that some line-item expenses can be reviewed, but most small teams aren’t frivolous with spending in the first place. “When you’re small and scrappy, most of the team is small and scrappy with the expenses,” he told Cory.

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Think Revenue, Not Just Reductions

Instead of obsessing over cuts, Ramsey recommends looking at your profit and loss statement monthly and asking, “Is every dollar helping us raise the bar?” But real growth comes from expanding services and increasing revenue, not just trimming spending.

“You can’t cut your way into success,” he said. “Most of the time that’s not it. So, generally speaking, it’s an increase in revenue from prices going up and extra lines being added.”

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