Sometimes a 10% Price Increase Isn’t Enough

Business owners hate raising prices.

We worry customers will complain.

We worry they’ll leave.

We worry someone will accuse us of being greedy.

So we raise prices 5%. Maybe 10%. Just enough to make ourselves feel like we did something—while often doing absolutely nothing to solve the underlying problem.

Sometimes the right increase is 20%.

Sometimes it’s 33%.

Sometimes it’s 57%.

And sometimes it needs to be even higher.

Because the question shouldn’t be:

“How much of an increase will my customers tolerate?”

The question should be:

“What does it actually cost to deliver the experience I’m promising?”

Recently, I worked through pricing with a client whose business provides a service at the customer’s home.

That distinction matters.

The customer isn’t driving to a central location. The service provider is driving to them.

That means every appointment includes more than the actual service.

There’s travel time.

Fuel.

Vehicle expenses.

Labor.

Scheduling.

Administrative costs.

Insurance.

Marketing.

And the dead time between appointments that can’t be sold to someone else.

Then we looked at the customer experience itself.

Rushing through an appointment because the pricing only allows 30 or 60 minutes might make the spreadsheet look better, but it can create a worse experience.

So the service evolved.

More time was allotted.

The provider wouldn’t have to constantly watch the clock.

The customer could receive the level of attention the service was supposed to provide.

And when we ran the numbers?

Some prices needed to increase 33%.

Others needed to increase more than 50%.

That’s a big increase.

And yes, some customers may leave.

In fact, one did almost immediately.

But here’s the interesting part:

The business owner was relieved.

Why?

Because that particular customer consumed roughly six hours of his week while generating only about $200.

Losing $200 sounds terrible.

Getting six hours of capacity back sounds very different.

Those hours can now be used serving customers at a price that actually supports the business.

That’s something entrepreneurs sometimes forget.

Revenue isn’t automatically good revenue.

If delivering $1 of revenue costs you $1.10 in time, labor, travel, overhead and opportunity, getting more customers won’t fix the problem.

It will accelerate it.

And profitability isn’t just about putting more money in the owner’s pocket.

Profitability protects the customer experience.

It allows you to spend more time with customers.

Hire better people.

Maintain equipment.

Invest in marketing.

Improve systems.

Absorb unexpected expenses.

And continue being there for customers next year instead of eventually burning yourself out or going out of business.

Of course, existing contractual obligations should be honored.

If you promised a customer a particular service at a particular price for a defined period, honor the agreement.

But that doesn’t mean you have to keep making the same pricing mistake forever.

When that agreement ends, the economics of the next one need to make sense.

So if you’ve been staring at your prices thinking…

“I can’t possibly raise them THAT much.”

Maybe you’re asking the wrong question.

Run the numbers.

Calculate the real cost of delivering your service.

Factor in the experience you want your customers to receive.

Build in enough margin to market, grow and remain profitable.

Then determine the price.

Maybe that’s a 10% increase.

Maybe it’s 33%.

Maybe it’s 57%.

Maybe it’s more.

Your customers don’t benefit from a cheap business that can’t afford to properly serve them.

Sustainable pricing isn’t just good for the business.

It’s part of delivering the experience you promised in the first place.