How to put your prices up without the week going badly

Nobody enjoys this one. A price rise is the only job on an owner's list where the downside is a conversation with a person you like and the upside is invisible until months later. So it gets deferred, usually until the margin has already gone.

The deferral is the expensive part. Owners who leave it 4 years then move in 1 jump create exactly the shock they were trying to avoid, and it's a bigger conversation than 4 small ones would have been. This is 1 of the money-block jobs in the guide to working on the business rather than in it, and it's the one most improved by having a process instead of a mood.

First, check that a rise is the right fix

A price increase solves a price problem. It doesn't solve a costing problem, a scope problem or a productivity problem, and it will hide all 3 for about 2 quarters.

Before you move, look at what actually changed.

• Input costs went up and the price didn't follow. That's a price problem. Raise the price.
• Jobs consistently take longer than quoted. That's an estimating or scope problem. Raising the price makes the quote wrong by a larger number.
• Margin is fine on paper but the account is always tight. That's a timing problem, not a pricing one.
• 1 service line is dragging everything down. That's a mix problem, and the fix might be repricing that line only, or stopping it.

Run the margin numbers by job type before you decide, because the answer usually names the line that needs attention rather than the whole book. Gross margin explained for business owners covers the calculation and how to read the gap between 2 lines.

Size the increase from your own numbers

Decide the number before you decide how to announce it, and derive it from your cost base rather than from what feels tolerable.

Rebuild the price properly: annual overheads, productive hours, direct cost of delivery, target margin. How to price your services without guessing walks through that arithmetic. What comes out is the price the business needs, which is a different thing from the increase you'll actually apply this quarter.

Then decide the pace. Moving straight to the full number is right when the gap is small or the business genuinely can't carry another quarter at the current price. Staging it across 2 or 3 steps is right when the gap is large, when contracts have review dates, or when you need time to lift what the customer receives alongside what they pay.

An illustration with round numbers, not a prediction. Take a business with a 35% gross margin. On $100 of revenue, delivery costs $65 and gross profit is $35. Put the price up 10% and the same job returns $45 of gross profit. At that new price, the business could deliver roughly 22% less volume and still finish with the same gross profit dollars. All figures ex GST.

That arithmetic isn't a forecast, and it isn't a reason to be casual about losing customers. What it does is put the fear in proportion. The risk of a modest increase is usually smaller than the certainty of standing still.

Decide who hears it, and in what order

Not every customer is the same customer, and treating them identically is what makes a price rise feel like a single terrifying event.

Sort your customer list into 4 groups.

1. New enquiries. Quote the new price from a set date. No announcement, no explanation, no history to manage. This group carries almost no risk and it's where most owners should start.
2. Regulars on no fixed agreement. Give clear notice with a date, in writing, ahead of the change.
3. Customers on a written agreement. Follow whatever the agreement says about review and notice. If you're unsure what it permits, your lawyer is the person to read it, not a coach and not a competitor.
4. The unprofitable few. Every service business has 2 or 3 accounts that consume disproportionate time at the lowest price. They're the group a rise most often moves on, and losing them is frequently the point rather than the cost.

Working through that list also tends to surface something bigger. If the business has sat at the same revenue for years, price is often only 1 of the causes, and what usually causes a revenue plateau covers the others worth checking at the same time.

Say it plainly, early, in writing

The wording matters less than owners think, and the timing and the medium matter more.

Give notice ahead of the change rather than presenting it on an invoice. 30 days is a reasonable minimum for regular customers; longer where the customer budgets in advance.

Put it in writing first, so everybody gets the same message and nothing depends on how a phone call went. Ring your handful of largest accounts separately, after the written notice has gone, so they don't hear it from an email alone.

A workable structure is 4 short lines: the change, the date, what stays the same, and thanks. Something like: prices are moving from 1 March. Your call-out rate goes from $X to $Y ex GST. Everything else about how the work runs is unchanged. Thanks for the work over the past few years.

Then stop. Don't stack the message with 3 paragraphs of justification. Long explanations read as an apology, and an apology invites a negotiation. Costs having risen is a complete reason and everybody already knows it's true.

Never blame the increase on a customer's own behaviour, and never announce it in the same message as bad news about a delay. Keep it clean and on its own.

When somebody pushes back

Some will. Most push-back is a request to be reassured rather than a threat to leave, and the 2 sound identical on the phone.

Hold the number, and offer a change in scope instead of a change in price. Fewer visits, a longer response window, a smaller package. That keeps the rate intact and lets the customer choose their own spend, which is a far better outcome than a quiet discount that nobody else knows about.

If you do concede, concede something finite: a fixed transition period at the old rate, with a stated end date. An open-ended exception becomes permanent, and it becomes known.

Expect a portion of customers to leave. That's not a failure of the process, it's the process working. The question worth asking about each departure is whether that account was carrying its share of the overheads, and the margin work you did earlier answers it.

Your registered tax agent handles tax. A coach works on what the business does to make the money in the first place, which includes what you charge and how you communicate it. Anything about what a written agreement obliges you to do sits with your lawyer.

Watch the right things for 90 days

After the change, resist judging it on the first fortnight. The 3 things worth tracking are quote acceptance rate, gross margin by job type, and the number of accounts lost against the revenue those accounts represented.

That last distinction is the one owners skip. Losing 5 customers who together made up a small share of revenue and a large share of your week is a very different event from losing 1 that funded half the overheads, and a raw count of departures treats them as the same thing.

Then diarise the next review. Twice a year, same months, applied as a small routine adjustment. A business that reviews price on a schedule never has to have the difficult version of this conversation again.