Raising your prices after years of charging too little

Raise your prices 20 percent, lose a fifth of your customers, and you're square. Do the math before you argue with it. A hundred jobs at $500 is $50,000. Bump the price to $600, watch twenty clients walk, and eighty jobs at $600 is $48,000. You're down two grand on paper and up twenty jobs' worth of time, fuel, materials, and Sunday evenings. Your costs drop with the volume. Your margin goes up. You're better off.

That's the whole case. Everything else is the mechanics of getting there without blowing up your book.

First, find out what you actually charge

Not your rate. Your rate is a number you say out loud. What you actually collect is different, because of the free revisions, the twenty-minute phone calls you don't bill, the drive across town, the invoice you knocked $200 off because the job ran long and you felt bad about it.

Pull last year's numbers. Total revenue collected, divided by hours you actually worked on paying jobs. Then divide again by everything else: quoting, chasing invoices, fixing the truck, the four hours a week on the phone with people who never buy.

The second number is your real rate. It's usually about 60 percent of what you think it is. If you quote $95 an hour and the math spits out $58, that's the figure you've been running your life on.

Write it on something. You'll need it in about ten minutes when somebody tells you your new price is too high.

Work backward from the number you need

Start with what the household requires. Mortgage, food, insurance, the thing your wife has stopped mentioning because she knows money's tight. Add what you owe for taxes, which you should be setting aside and probably aren't at the right percentage. Ask your accountant for that figure instead of guessing. Add overhead: tools, software, vehicle, insurance, the shop.

Now add the hours you can't bill. Every operator underestimates this. If you're solo, a realistic billable week is well under the hours you're at work. Count your own from last year rather than trusting a figure somebody put in a book.

Divide. That's your floor. Not your price. Your floor. Price sits above the floor, because the floor assumes a full year with no sick weeks, no slow February, and nobody stiffing you on a final payment.

Raise the new work first, quietly

Don't announce anything. Don't post about it. The next person who calls gets the new number, said flat, with no preamble and no nervous laugh at the end of the sentence.

This is the cheapest test you'll ever run. You risk nothing except one job you weren't counting on. Quote the new price six or eight times and watch what happens. If everybody says yes immediately, you didn't go far enough. Go again.

You're looking for a flinch. A pause. Somebody saying they'll need to think about it. That's the signal that you've finally arrived somewhere near the market. If nobody ever hesitates, you're the cheapest option in your area and every one of your customers knows it, even if they've been kind enough not to say so.

Then the existing book, on a date

Existing clients are different. They've built budgets around you. They deserve notice, and notice is the whole of what they deserve. Sixty days is plenty.

One email. Short. Something close to this:

"From March 1, my rate for [work] moves to $X. Anything already scheduled before that date stays at the current rate. Happy to talk through what this means for the work we've got planned."

That's it. Don't explain your costs. The second you mention that insurance went up and material prices are brutal, you've handed them a list of things to argue with. They'll come back with their own costs, and now you're two men comparing hardships, and the price is somehow still the old one.

Don't apologize either. "I'm really sorry to do this" tells them you think the new price is unfair. If you think it's unfair, they'll think it too.

What to say when they push

Some will push. Hold the number and move the scope.

"I can't do that price, but I can do a smaller version of the job for it." Then name exactly what comes out. Fewer site visits. A four-week turnaround instead of two. No after-hours calls. Quarterly instead of monthly.

This works because it's honest. The price isn't arbitrary, it's attached to an amount of work, and less money buys less work. It also gives the client a way to say yes without feeling rolled.

What you never do is split the difference on the spot. If you quote $600, they say $450, and you say $525, you've taught them that your prices are an opening bid. Every future quote gets haggled, and you've turned yourself into a market stall.

Somebody sensible would tell you to grandfather your oldest clients forever out of loyalty. I'd push back on that. Loyalty that only runs one direction isn't loyalty, it's a habit. But there's a fair version: give your long-standing people a longer runway and a smaller first increase. Twelve percent now, the rest next year. That's a real concession and it costs you very little.

The ones who leave

Watch who goes. It's almost never the client you were dreading.

The ones who leave loudest are usually the ones who called at 4 p.m. on a Friday, wanted it Monday, paid in 60 days, and questioned a line item every single time. When they go, your week gets quieter and your revenue barely moves. You'll feel the absence of the arguing before you feel the absence of the money.

The client you were genuinely worried about losing will mostly say fine. They knew. People who buy a lot of work have a decent sense of what work costs, and plenty of them have been quietly wondering how you were surviving.

Where this advice doesn't hold

Three situations. If your pipeline is empty and you've got under a month of cash, fix the pipeline first. Raising prices with no leads is just a slower way to go broke. Get work in, then reprice from a position where you can afford to hear no.

If one client is 60 or 70 percent of your revenue, you don't have a pricing problem, you have a concentration problem. Go find two more clients before you go anywhere near that conversation.

And if you're inside a signed term, honor it. Raise the number at renewal, flag it early, and don't try to be clever about what the contract technically permits. Ask a lawyer if the wording is genuinely unclear. Your reputation for doing exactly what you said you'd do is worth more than one quarter of catch-up revenue.

Measure the right thing afterward

Revenue is the wrong number to watch for the next six months. Watch revenue per hour delivered. If revenue dips 8 percent while your hours drop 25 percent, you won. That's an afternoon back, and a business that can survive a slow quarter.

Also watch what you say yes to. Undercharging isn't only a pricing problem, it's a saying-yes problem. You took the awkward job because you needed the four hundred bucks. At the right price you can turn it down, and turning it down is what keeps you doing good work at 3 p.m. instead of patched work at 10 p.m.

The hardest part isn't the email. It's the eleven days afterward when the phone is slower than usual and you're certain you've ruined it.

Sit through that. It passes, and the work that comes after it's better paid and less of it.