Almost every service business we look at is priced against its own costs from two years ago. Labour went up, insurance went up, materials went up in steps nobody logged, and the price list moved once, reluctantly, by less than any of them.
The reason is never that owners cannot do the arithmetic. It is that a price rise involves telling people something they might not like, and that conversation is easy to postpone indefinitely while margin quietly compresses.
Run the number that removes the fear
Before deciding anything, work out how much volume a price increase can afford to lose. It is a short calculation and it reliably changes the conversation.
Suppose you run a 20% net margin and you raise prices 10%. Every remaining job now carries substantially more profit, so you can lose roughly a third of your volume and still finish level on profit — while doing a third less work, with a third less fuel, wear, and overtime.
Actual attrition on a well-executed increase is usually in the low single digits. The gap between what you can afford to lose and what you actually lose is the entire case for doing it.
Know which signals mean you are underpriced
Four of these, and the question is no longer whether to raise prices but by how much.
- You win almost every quote. A close rate above roughly 70% on quoted work usually means you are the cheap option, not the convincing one.
- You are booked out and turning work away. Demand exceeding capacity is the market telling you the price is too low, in the clearest language it has.
- Nobody ever pushes back. Zero objection is not a sign of great value; it is a sign of no resistance at all.
- Your margin has fallen while revenue grew. The classic shape of a business absorbing cost increases it never passed on.
- You cannot pay competitively. If you are losing good technicians on wages, your price is deciding your hiring, and it will decide your quality next.
How to actually do it
- 01Segment before you decide the number
One increase across the whole book is the lazy version. New customers can move immediately. Recurring clients need notice. Your worst accounts can take a larger rise than average — and if they leave, the outcome is fine.
- 02Move new customers first
A new price for new work needs no announcement, no letter, and no conversation. It is the entire increase with none of the friction, and it tells you within a month whether the market resists the number.
- 03Give recurring customers 30 to 60 days' notice
In writing, before the first invoice at the new rate. A price rise discovered on an invoice reads as something done to them; the same rise announced in advance reads as a business being run properly.
- 04Change something visible at the same time
Not a justification — an addition. A faster response commitment, an extra check on each visit, a longer warranty. It gives the increase a shape, and it costs less than the increase brings in.
- 05Do it once, properly
Two 5% rises in a year generate two conversations and twice the irritation of one 10% rise. Annual, predictable, and announced is the pattern people accept without much thought.
What to write
The letter people agonise over should be short, unapologetic, and specific. Length reads as guilt.
- Say the number and the date. Not "a modest adjustment." The actual new price, and when it starts.
- Give one honest reason, once. Costs, wages, whatever it is. One sentence, not a paragraph of apology.
- Say what stays the same or improves. Same crew, same slot, plus whatever you are adding.
- Thank them and stop. No offer to discuss, no invitation to negotiate — that turns an announcement into an opening bid.
And do not send it as a mass email that reads like one. For recurring or high-value clients, the same words sent individually — or said on the phone for your largest accounts — changes the reception entirely.
Handle the pushback in advance
| What they say | What it usually means | What works |
|---|---|---|
| "That is a big jump." | It is the first rise in three years | Say so. "We have held this price since 2023" is a complete answer. |
| "I can get it cheaper." | Testing whether the price is real | Acknowledge it and hold. "You probably can. Here is what you get with us." Cracking here teaches every future negotiation. |
| "I need to think about it." | Usually genuine, usually returns | Give a date the old rate ends and stop selling. Most come back. |
| "Can you do the old rate for me?" | Reasonable ask, expensive precedent | Only with something in exchange — annual prepayment, a longer commitment. Never for free. |
The part that makes the next one easy
A price increase is painful in proportion to how long it has been since the last one. A business that reviews prices every year, at the same time, with a small increase, has a routine. A business that goes four years and then needs 25% at once has an event, and events are what customers remember and object to.
Put it on the calendar. Same month annually, before your busy season rather than during it, applied to new customers first and recurring customers with notice. After two cycles nobody is surprised, and the conversation you have been dreading becomes an administrative task.
TARGETS
One thing to watch afterwards, because it is the only real evidence: your close rate on quotes. If it barely moves, the increase was overdue and you should plan the next one. If it falls sharply, you have found the ceiling for that segment — which is useful information you did not have before, and it cost you a month.
You are not raising prices on your customers. You are catching up to costs they have already been passed everywhere else.
Common questions
How much should I raise my prices?
Enough to restore the margin you have lost, which after a few years of absorbed cost increases is usually more than feels comfortable — often 8–15%. Run the arithmetic first: at a 20% margin, a 10% rise lets you lose about a third of your volume and still hold profit level, and real attrition is normally low single digits.
How do I tell customers about a price increase?
In writing, 30 to 60 days ahead of the first invoice at the new rate, with the actual number and the date, one honest sentence of reason, and a note of what stays the same or improves. Keep it short — length reads as guilt — and do not invite negotiation, which turns an announcement into an opening bid.
Will I lose customers if I raise prices?
Some, and they are usually the least profitable ones — the accounts that haggle every invoice, pay slowest, and call most. The gap between how much volume you can afford to lose and how much you actually lose is large, which is why the increase almost always comes out ahead.
How often should a service business review prices?
Annually, in the same month each year, before the busy season rather than during it. A yearly single-digit increase is a routine nobody objects to; four years of nothing followed by a 25% correction is an event, and events are what customers remember and push back on.