Raise your prices on the slow payers first

Quick answer: Raise prices on every new quote today. Give your on-time payers a modest increase with thirty days' notice. Give the slow payers and the haggler a bigger one, plus tighter terms. If a few of those walk, your cash flow improves.

The math says you can lose more than you think

Most guys put off a raise because they picture losing half their book. Run the numbers first. This is an illustration, not your shop, so swap in your own figures.

Say you keep 40 cents of every revenue dollar after materials, fuel and the direct costs of the job. You raise prices 10 percent. Your new take is 50 cents on the old dollar. To make the same money as before, you only need 80 percent of your old volume (40 divided by 50). You could lose one customer in five and break even, and you'd have a lighter schedule to do it with.

A 5 percent raise on the same margin breaks even if you lose about one in nine. At a 25 percent margin, a 10 percent raise breaks even at roughly 29 percent fewer jobs. Thinner margin means the raise is more powerful, not less.

Almost nobody loses that many. But the math tells you what the fear is really worth.

Who actually leaves

Think about who walks when you raise prices, and it's rarely the story you tell yourself at 11 p.m. The customer who pays on completion, answers the phone and doesn't argue the invoice is the least likely to leave. He's buying reliability, and he knows it. A few percent on a $400 job doesn't register against the cost of finding someone else who shows up.

The ones who leave are the ones who were shopping you all along. The guy who asked for a "friend price" in 2022 and has never let you forget it. The customer who pays at 45 days with a cheerful "oh, I forgot."

Count what that costs. Suppose a late invoice eats two hours of your time in texts, calls and a drive-by. At $75 an hour for your time, that's $150 per late invoice, on a job where you may have cleared $300. That customer is already getting a discount. You've just never written it on the bill.

Sort your list before you touch a number

Take twenty minutes with your invoices from the last twelve months. Put every repeat customer in one of three piles.

• Pays within terms, no drama. These are your core. Protect them.
• Pays late, or only after a reminder. Mark how many days late, on average.
• Negotiates every job or changes scope halfway. You know who they are by name.

Your bank statement or invoicing history will show this faster than memory will. If you keep one account and a weekly money habit, the data's already sitting there. One business account and a Friday habit beat any software covers how.

Run three different raises

Pile one, the good payers. Give a modest increase, 5 to 8 percent for most trades as an example, with thirty days' written notice. Keep it short and personal. Something like:

"Starting March 1, my rate moves from $85 to $90 an hour. Materials and insurance have gone up and I'd rather raise the price than cut corners. Anything we book before March 1 stays at the old rate."

That last sentence does the work. It gives a loyal customer a reason to call you now, and it fills your calendar ahead of the change. It doesn't apologize either. Skip "I hate to do this." You're not robbing anyone.

Pile two, the slow payers. Raise them more, 10 to 15 percent, and change the terms in the same letter. Half down to book, balance due on completion. Net 7 instead of net 30. If they push back on either, you've learned something cheaply.

Pile three, the hagglers. Give them the new full rate with no discussion. Send the number, the start date and nothing else. If they negotiate, you can hold the number or let them go. Both are fine.

New quotes are the easiest raise you'll ever make

An existing customer has a memory of what you charged. A new one has only your quote and two or three competitors' quotes. Raise every new quote today, and nobody can feel the difference.

Watch your close rate for a month. If you're winning nine out of ten bids, you're underpriced. A guy who wins every job isn't the best in town, he's the cheapest. If you land four in ten, you're probably in the right range. If you land one in ten, don't raise. Look at how you're quoting before you look at what.

It also helps to know what your own hour is worth before you pick a number. Why $45 an hour is a pay cut when it's your own truck walks through what's hiding in that rate. And if you're working seventy hours to make the month, your seventy-hour week is a pricing problem, not a work-ethic problem.

When the raise doesn't work

Be honest about the cases where this advice bends.

If you've got one customer who's 60 percent of your income, he's not a pile. He's a risk you should be fixing, and a big raise on him is a gamble. Raise him gently while you build other work. If your market really is a price war, with three outfits undercutting each other on commodity jobs, you'll lose volume you can't replace. That's rare for skilled trades, but it's real in a few places.

Materials are a separate lever. If lumber, wire or copper jumped, pass it through at cost plus your handling markup, line by line on the invoice. Customers accept a documented material increase far more easily than a higher labor rate.

Run the specifics past your accountant before you restructure how you bill, since deposits and payment terms can affect how and when income is counted. This piece is general education, and your accountant knows your books.

The follow-through

After the notice goes out, don't blink. Some guys send the letter and then discount the first job that pushes back. That teaches everyone the number was a suggestion.

Send it, hold it, and watch your Friday numbers for sixty days. You'll likely lose a name or two you were quietly relieved never to see again. The ones who stay will pay a little more, and pay on time, for work done by a man who stopped apologizing for it.