(FORTUNE Small Business) – I was sure we'd lose the account. No way, I told my brother, will they accept a 20% price hike. I glumly drove the 90 miles from our factory to Salinas, Calif., worried that we were about to part ways with one of our oldest and largest customers. Later, as my brother handed our new price list across the customer's conference room table, I looked away. Rather than turning angry, the purchasing agent joked, "Maybe we should stop using plastic." He added, "What day are these effective?"

Not long ago customers routinely beat us back from price increases. They would dredge up some competitor willing to sell at or below cost, then use the offer to force concessions from us. I was terrified to raise prices, whether our raw material costs increased or not. The major raw material for the plastic in our bags is natural gas, and even as gas prices soared, I made every effort to avoid passing along our higher costs. I bought plastic as far forward as our credit lines would allow and jumped between suppliers in search of the best deals.

At first I didn't believe natural gas prices would remain high for long. And I couldn't shake my fear that any increase in our bag prices would translate into lost sales as desperate rivals underbid us. The specter of cheap bags from China also worried me. No matter how much my father--who scrupulously attends to the bottom line--pushed me to raise prices, I waited through early fall, praying raw material costs would ease.

Finally I had to accept reality. Never mind the foolish rivals or low-priced imports, we had to pass through increases. Plastic typically makes up one-third of our costs. But because of the increases, plastic began to approach 50% of the cost on some items in the fourth quarter and ate away at our already slender margins. The price hikes restored some of our margin, and rather than fight, most customers merely asked us to consider price caps or quarterly price escalators in the future.

Why didn't they fight harder? It certainly helped that industry consolidation had reduced the number of suppliers that purchasing agents could play against one another. Without desperate rivals making profitless deals just to boost revenues, our remaining competitors became more rational about passing along rising costs. More important, perhaps, almost every producer, from box manufacturers to steelmakers, passed along increases at the same time, largely driven by tight supply and spiraling raw material prices. Hit by numerous increases at once, purchasing agents could not argue that "you are the only one bringing me increases."

Looking back, I think our buyers recognized reality before my fear would allow me to do so. My hesitation cost us two or three percentage points of margin in the fourth quarter, and could have cost much more if I had dithered any longer. The lesson? I have to pay more heed to pricing our product so that we make a profit, and worry less about whether we'll lose business.

Of course, I don't expect we'll be able to pass along every price increase, and I imagine a rival will offer a stupid price someday not far off. And with commodity costs continuing to rise, my newfound courage will soon be tested again.