Your Price Increases Should Be Scheduled — Not Panic Moves

The Shop That Waits Until It Hurts

Supplier hits you with a 12% jump on copper in March. You absorb it for two months because you've got existing quotes out. Then a tech quits in May and you realize you need to pay $4 more an hour to replace him. Then Q2 closes, margin has gone soft, and you can't immediately explain why. So you have the pricing conversation. Finally. The one that should have happened in January of last year.

That's the reactive shop. Most shops are reactive shops.

The crash didn't fix this. After October 2008, the shops that didn't die outright mostly did something worse — they held prices flat for two, three years because they were terrified of losing what customers they had left. I watched three shops around central Massachusetts do exactly this. None of them failed in 2008. Two folded quietly in 2011 and 2012, by which point their flat rates were a bad joke. The crash didn't kill them. Stale pricing and fear did.

If you can't identify how long your current rate structure covers your actual cost of operating, you don't have a pricing model. You have a guess that's getting older every week. An undercapitalized shop bleeds out. A shop with stale pricing bleeds out the same way, just slower — a dollar an hour short, compounding quietly until one bad month exposes four years of drift and nobody inside can explain how it happened.

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Scheduled Increases Aren't Arrogant — They're Honest

Most contractors treat a price increase like a confrontation they've been avoiding.

It isn't. It's the same logic as checking your expansion tank pressure every season — not because something's failed yet, but because waiting until it does costs more than the half hour you spent catching it.

Pre-announcing a scheduled increase — sixty days out, in writing, with a clear effective date — does something most people don't expect. The customer who's been with you for four years stops reading the notice as a shake-down and starts reading it as evidence you know what you're doing. Customers who've been around long enough have already watched their insurance go up, their grocery bill go up. A clear notice with a date lands differently than a higher invoice with no warning and no explanation.

The customers most likely to leave over a 7% annual increase were already getting three quotes every spring. Losing them because you raised prices is a net positive. You cleared a slot for someone who values the work.

Most contractors who claim they lost customers over a price increase weren't holding customers. They were holding price-sensitive accounts that were leaving anyway — just waiting for the excuse. The next guy coming in forty bucks cheaper would have done it just as well.

I teach code two nights a month at the voc school here in Worcester. I had a kid last fall — two years in, working for a small residential shop — who spent most of a class break agonizing over whether his boss's diagnostic fee was too high to quote over the phone. Terrified of losing the call. That's the wrong fear. The right question is whether that caller — the one who hangs up if you say the fee before you say anything else — is the customer you want filling your Tuesday. Usually the answer is no.

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What I Found When I Finally Ran the Numbers in 2011

In the fall of 2011 I sat down to rebuild my flat rates from scratch. Not because I wanted to. Because Diane sat across the kitchen table and asked me why we were busier than we'd been in three years and still behind on the truck note.

I went back and looked at my service call rate. I had barely touched it since 2007.

Four years. Fuel up. Insurance up. The cost of a good tech up. And I was still running 2007 numbers because I was scared. Not of the numbers. Of the phone calls.

When I did the actual cost-of-doing-business math — loaded labor rate, truck costs, insurance allocation per call, material burden — I found I'd been $14 to $18 short on a standard service call for at least two years. Not because I didn't know how to price. I knew. I'd built rates before. But after October 2008, when I sat down with four guys I'd hired personally and told them I couldn't keep them, the fear of losing any customer we had left got into my head and stayed there.

Small shop owners don't freeze on pricing because they're lazy or bad at math. They freeze because losing a customer, in a rough year, feels like laying someone off. If you actually did have to lay people off — if you remember the specific faces, the specific conversations — that feeling hits the same place every time. It's louder than the spreadsheet.

Firing Whitman Builders in 2011 over their 90-plus-day payment habit helped clarify my thinking. Once I stopped carrying a GC who was using my payroll as a free credit line, I had to look hard at every number I had. That's when I found the $14-to-$18 gap. It's also when I decided I was never letting that gap appear again without catching it early.

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Build the Schedule: Annual, Pre-Announced, Non-Negotiable

Pick one date. January first is clean. Some shops use their insurance renewal date — useful because when a customer asks why, you have a documented event to point to. "Our insurance renewed in November, labor adjusted in December, rates reflect that starting January." That's not a conversation. That's a fact.

Notify sixty days before the effective date. Not thirty. Sixty. In writing. Email works. A letter works. A phone call to your top twenty accounts is better — not to negotiate, but to be a professional about it. The notice should say the effective date, the general range of adjustment, and one or two honest sentences about what drove it. No apology. Just clear.

One thing I've been on about for years: if you're pulling your rates from a flat-rate subscription book, you don't actually know your own cost basis. You know someone else's. When you do an "annual increase," you're adjusting someone else's starting point by a percentage with no relationship to your specific operation. Build your own. Loaded labor rate, overhead allocation, material burden, margin — your numbers, your shop, your Worcester. If that math takes you an afternoon, it's the most valuable afternoon you spend this year.

Post-2009, I ran COD on residential service and T&M with hard caps on anything I couldn't scope completely. Price was a documented thing, not a negotiation I was having fresh every time. That discipline is the precondition for scheduled increases to work. If your pricing is already fuzzy — if you're quoting by feel, adjusting by the customer's reaction — a scheduled increase is just a scheduled guess. Fix the underlying number first.

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The Customers Who Leave Are Telling You Something Useful

The customer who calls to complain about a 7% increase has a recognizable profile. He's 60-plus days on his last invoice. He calls four times to decide on a water heater. He wants the diagnostic fee waived because you "didn't even fix anything." He got three quotes before he called you and made sure you knew it. He is not your best customer. He costs you money to have him.

The GC version is worse. Builders who stretch you past 60 days while expecting last year's pricing are negotiating with your money, not theirs. The Whitman situation taught me that directly. Raise them 15% at renewal. If they walk, your receivables problem stops getting bigger.

The other thing that happens when shops hold prices flat to keep volume: they stay busy enough to need another hire but short enough on margin that the hire doesn't pencil. So they stretch the existing guys. And the best guy on the crew — the one who knows the routes and the accounts, the one who could run three guys and still turn a wrench — leaves for the gas company because the gas company offers him a number that makes sense. The shop didn't lose a tech because it was a bad shop. It lost a tech because it held prices flat to keep accounts that didn't deserve flat pricing.

When you stop being the cheapest guy in the van, some customers leave. That clears room. It's not complicated.

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What You Do Monday Morning

First: Run your cost-of-doing-business number before you pick any percentage. Truck notes. Insurance. What you're paying your techs loaded — wages plus burden, workers comp, the works. Fuel. Your own time if you're still in the field. Divide by your billable hours. That's your floor. If you don't know that number, the percentage you pick for your increase is a guess with a percent sign on it.

Second: Decide on your effective date. If January is too close, push to February. Give yourself sixty days for notice. Don't compress it.

Third: Write the customer notice this week. Even if the increase doesn't land for two months, write it now. Short. Effective date, what's changing, one honest sentence about why. No apology. If you're sending email, send it from you, not from an automated queue. Customers who've been with you four years deserve a note that reads like you wrote it.

Fourth — don't skip this: Before you close the laptop, set a calendar reminder for the same week next year. Name it something direct. If it's in the calendar it's maintenance. If it's not, it's a panic move you'll make in a bad quarter.

Do those four things Monday. The increase can be modest the first year — you're building the habit, not making up for a decade of drift in one shot. But you're building it on a schedule. That's the difference between a shop that controls its own economics and one that reacts to them.

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FAQ

What percentage increase is reasonable to do annually without losing customers?

Nobody can tell you that without knowing your cost basis, and anybody who quotes you a number without knowing your operation is guessing. Run the cost-of-doing-business math first. The percentage should come from that number. If you've held rates flat for three or four years, the first increase will feel large — because it is. Don't spread it across two years to soften it. Take it, pre-announce it, and move on.

How do I handle a long-term customer who pushes back and says they'll go elsewhere?

Let them decide. Don't negotiate the increase on the spot — that turns a scheduled adjustment into an auction where you're bidding against yourself. Acknowledge the history, be respectful, confirm the effective date. In my experience, the customers who threaten to leave over a reasonable annual adjustment rarely do. The ones who actually leave were already looking for a reason.

Should I raise prices on existing contracts or just new work?

Depends on the contract language. Any contract without a written escalation clause is a problem you created when you signed it. Going forward, build escalation language into every agreement. For month-to-month service accounts with no hard contract, your written notice is your mechanism. For existing fixed-price contracts, honor the price, finish the job, reprice at renewal. Don't try to reopen a signed number mid-job.

What's the right way to notify customers — email, a letter, a phone call?

Phone call to your top ten accounts. Letter to commercial accounts and long-term residential customers. Email covers the rest. The call isn't to negotiate. It's to say: here's what's coming, here's why, you're hearing it from me. Done right, that call usually strengthens the account.

What if my competitors aren't raising prices and I'm worried about losing bids?

Then some of them are headed for the same wall those central Massachusetts shops hit in 2011 and 2012. You cannot build a shop on matching a number you have no reason to believe is profitable. If your cost basis says you need $185 for a service call and the guy down the road is at $165, either your cost structures are genuinely different or those bids aren't for you. Racing an undercapitalized shop to the bottom means you end up in the same place they're going.

Is there a bad time of year to roll out a price increase?

Timing matters some. Announcing mid-job or right after a service call that had complications makes a scheduled increase look reactive even when it isn't. January works well for most shops — new year, natural renewal cycles, customers expect their costs to reset. Pick a date, give sixty days notice, let the date do the work. The schedule is the point.