A price increase feels like something you do to your customers. It is not. It is a number you set from your own costs, and if you do not set it, last year sets it for you.
The math is the easy part, and most of it is one division. What stops people is saying the number out loud to somebody who has been calling them for six years. So the math is here in short form, and the rest of this is when to do it, what to say, and what to do when someone pushes back.
The signs you are overdue
None of these are opinions. You can check all five this week.
You are booked out and still turning work away. Three weeks of backlog means demand is higher than your price. That is the cleanest signal there is, and it is free.
There is no room for a raise. Your best tech asks for two dollars an hour and you have to think about it for a week. The money that should cover that raise was priced out of the job before the truck rolled.
The year ends with nothing in the account. You paid the parts bill, paid the crew, paid yourself something, and there is nothing left to replace a van or sit out a slow February.
Costs moved and your price did not. Look at what diesel and gasoline have done since your last price change, or at the price indexes if you are in Canada. Then pull your insurance renewal and your last three parts invoices. If those numbers moved and your labor rate did not, the difference came out of you.
You only win on price. If the jobs you win are the ones where you were cheapest, you are competing on the one thing you cannot be best at for long. Somebody with a newer truck and less sense will always go lower.
Busy is not the same as profitable. A full schedule at the wrong rate means you are losing money faster, with less time to notice.
Start from your own numbers, not the shop down the road
What the shop down the road charges tells you nothing. You do not know their overhead, their volume, or whether they are still answering the phone next spring. How to price a service call walks through the full method. The short version: add what you want to take home to what the business costs to run, then divide by the hours a customer actually pays for, not the hours you work.
One owner, one truck, using example numbers:
- Pay you want to take home in a year: $70,000
- What the business costs to run in a year: $30,000
- Hours a customer pays for: 25 a week, 50 weeks, so 1,250 billable hours
$100,000 divided by 1,250 hours is $80 an hour. That is break even, where you have paid yourself and paid the bills and the business kept nothing. Add 15 percent for the business and it is $92.
Run yours in the hourly rate calculator before you pick a new number. If it says $92 and you are charging $80, the increase is not a negotiation you are having with yourself. It is arithmetic you already lost once.
What an increase is actually worth
This is why the awkward phone call pays. At 1,250 billable hours a year:
| Increase per hour | Added over a year | What it adds to a two hour job |
|---|---|---|
| $3 | $3,750 | $6 |
| $6 | $7,500 | $12 |
| $10 | $12,500 | $20 |
| $15 | $18,750 | $30 |
Six dollars an hour is $7,500 a year. On the customer’s side it is twelve dollars on a two hour job, less than the trip fee they already agreed to without blinking. The number that changes your year barely registers on one invoice.
While you are in there, check your parts. If labor goes up and your markup has not moved in three price lists, you did half the job. The markup and margin calculator shows what a markup actually keeps, which is always less than people expect.
How much, and how often
Review the rate once a year, on a date you pick, whether or not anything dramatic happened. A yearly review that lands on a small increase is easier on everyone than a 20 percent jump after four quiet years.
If the review says you are less than about 10 percent behind, take it in one step. If you are further behind than that, you have two honest choices.
All at once. It stops the bleeding now and it is over in a week of conversations. A few customers will say something. Most will not.
Two steps, six months apart. Easier to say out loud. It also costs you: at six dollars an hour, half a year of 625 billable hours is $3,750 you never get back.
Either way, raise the price list, not the quote in front of you. A rate you defend one customer at a time is not a rate, it is a mood.
Picking the date
Go in your quiet season. You want the slow weeks for this, when the schedule can absorb a couple of losses and you have the patience for the calls.
Use one effective date and say it plainly. “Prices effective March 1” is a fact people can plan around. “We will be raising prices soon” invites a rush of callers trying to book at the old rate.
Honor what you already quoted. A quote you sent is a price you promised until it expires, and in several places that is not just good manners. In Ontario, the province tells homeowners that the final price cannot be more than 10 per cent over the original estimate unless they agreed to new work or a new price. In California, the licensing board is blunt about mid job changes: if the contract price or scope changes, it must be done with a written change order signed by both sides before the change. So put an expiry date on every quote you send, and let the old ones run out on their own.
Move maintenance plans at renewal, not mid term. Tell those customers in writing before the renewal date. If the plan renews automatically, check the rules where you work first. California, for one, requires a business to give a customer clear notice 7 to 30 days before a fee change takes effect on an automatic renewal.
Give commercial accounts notice. A property manager cannot pay a new rate without updating something on their side. A month ahead, in writing, is usually enough.
Who to tell, and in what order
Most of an increase lands quietly, because most of the people who pay it never knew the old price.
- Your crew, first. Before a single customer hears it. Give them the new numbers, the effective date and one sentence of reason. A tech who finds out in a driveway will apologize for the price, and an apology is a discount with extra steps.
- New callers. They get the new number with no explanation, because to them it is just the price.
- Repeat customers, when they call. Say it at the start, before you book the visit.
- Maintenance plans and commercial accounts. In writing, ahead of the renewal.
You do not owe anyone a mass email. A note to every customer you have ever had reads like a utility rate letter and puts the increase in front of people who were not thinking about it. If you do send something, keep it to four lines.
The words
The mistake is over-explaining. One sentence of reason, then move on to booking the work.
For a repeat customer on the phone:
“Before we book, our rate went to $92 an hour on March 1. It is the first change in two years, and it covers what insurance and parts have done since then. Everything else is the same, same crew, same scheduling.”
Then stop talking and ask what day suits them. The silence after a number is not an invitation to defend it.
If you send an email or a text, short is better:
Subject: Our rates from March 1
Hi [name]. Starting March 1, our labor rate is $92 an hour and our service call is $150. It is our first change in two years. Anything already quoted stays at the quoted price until it expires. Thanks for the work this year, and call or text when you need us.
For a maintenance plan at renewal:
“Your plan renews on the fifteenth. It is going from $x to $y for the year. It still covers the two visits, the filter and priority booking when something breaks.”
When someone pushes back
Some will. It is usually one sentence, and it is usually not the end of the conversation.
Hold the number. Repeat it once, calmly, and do not follow it with a discount in the same breath. Most people are only checking whether the price is real.
If you want to give ground, give scope instead of price:
- Move the visit into a slower week.
- Do the unit that is failing now and the second one next quarter.
- Combine two properties into one trip.
If you do discount, get something for it. Payment on the day, both units in one visit, a date that fills a hole in the schedule. A discount given for nothing teaches a customer to ask again every time.
“I hear you. The rate is $92 as of the first. If it helps, I have room the week of the fourteenth, which is slower for us, or we can do just the unit that is failing now and leave the other until spring.”
The one to avoid is quietly keeping the old rate for a handful of favorites. Every one of them is a leak, and your crew sees all of them. If somebody genuinely earns a better price, write it down as a discount with a reason and a review date, and show it on the invoice as a line.
The customers you can afford to lose
Some will leave. Do this arithmetic before the first call, not after.
Say you are at $80 an hour and 1,250 billable hours, which is $100,000 of labor revenue. You go to $92, a 15 percent increase, and you lose 10 percent of the hours.
- 1,125 hours at $92 is $103,500.
- That is $3,500 more for 125 fewer hours worked.
- Those 125 hours also came with fuel, wear, parts runs and a day of your life each.
You can lose a fair amount of work and still come out ahead. What you cannot afford is losing the wrong ones, so decide in advance who the right ones are:
- The customer who gets three quotes for a $400 repair, every time.
- The one who pays in 60 days and makes you ask twice.
- The one who calls at nine on a Sunday for something that waits until Monday.
- The one who argues about the invoice after every job.
You do not have to fire anybody. Stop discounting and most of them sort themselves out. If one asks straight out, be short and polite. You are booked, your rate is your rate, and you are glad to help if it works for them later.
Making it stick
An increase leaks in the weeks after it starts, not on day one.
- One price list, one place. Everyone who quotes works from the same numbers, including you at nine at night.
- Update everything that shows a price. The quote template, the sheet in the truck, anything on your website, the script the phone gets answered with.
- Put an expiry date on every quote. Thirty days is normal. Without one, a quote from April is a price you owe in November.
- No quiet discounts. If money comes off, it shows on the invoice as a discount line with a reason.
- Check at 90 days. Pull ten invoices at random and read the labor lines. If the old number is still showing up, the leak is inside the shop, not out in the market.
- Write next year’s review date down now. Same month, every year, whether or not you feel like it.
Then it is settled for a year. The rate on your invoices should be a number you chose this year, not one that carried over because nobody looked at it.
