Most small businesses I talk to are underpriced by 8-15%. They know it. They've known it for two years. They're still charging 2023 rates in 2026 because the first price increase feels like jumping off a cliff. It isn't. Here's how I run it.
Before a single customer hears anything, I want three numbers on paper. One: your fully-loaded cost to deliver, including the raises you gave staff last year and the insurance premium that jumped 11% in January. Two: the price a comparable competitor is charging right now, pulled from their actual website or a quote, not your memory from 2024. Three: the margin you need to fund the next hire. If those numbers say you need a 9% increase, propose 12%. You will negotiate. Plan for it.
One more thing. Segment your customer list before you touch pricing. Top 20% by revenue, middle 60%, bottom 20%. The bottom 20% is almost always where you're losing money on small jobs, late payers, and the customer who emails you on Sundays. Price them out on purpose. If they leave, your margin goes up and your weekends come back.
Verbal price increases get forgotten and then disputed. Every time. I send a short, signed letter or email 60 days before the new rate takes effect. Three paragraphs: what's changing, when it takes effect, and one honest sentence about why. Not a sob story. Somehting like "our labor and materials costs are up roughly 10% over the last 18 months, and this adjustment keeps our service quality where you expect it." That's it.
For your top 20%, do it on a phone call first, then send the letter as confirmation. These are the customers who deserve to hear it from a human, and they're also the ones most likely to renegotiate or ask for a longer-term lock. Both of those are fine outcomes. What's not fine is them finding out from an invoice.
In my experience, a well-handled 10% increase loses you somewhere between 3% and 7% of customers. That's not a failure. That's the market telling you which accounts were price-shopping all along. Do not chase them with discounts the week after they push back. You just spent 60 days establishing that the new number is the new number. Holding the line is the entire point.
The customers who stay, which will be most of them, will quietly adjust and never mention it again. I've watched this play out across dozens of small businesses and the panic-loss almost never materializes. What does materialize is a healthier P&L by Q3.
If you're sitting on a pricing increase you keep postponing and want a second set of eyes on the segmentation and the letter before you send it, drop us a note. This is a one-week project, not a six-month engagement.
— Amanda @ SBATC
