It’s easy to focus on the customers you might lose when you put your prices up. But what’s often overlooked is how much extra work you’d need to win at your current prices to make the same amount of money.
In simple terms, winning the job is one thing, but making enough from it is another.
Let’s say you charge $1,000 for a job, and the direct costs of doing that work are $600. That leaves $400 to cover your overheads and contribute to profit. We’ll call that your contribution.
If you put your price up by 10%, you’re now charging $1,100. Assuming those direct costs stay the same, you’ve got $500 left from each job.
That’s a 25% increase in what each job contributes, which is pretty good.
If we put it another way, you could do eight jobs at the new price and get the same contribution as ten jobs at the old price.
That doesn’t mean you should expect to lose two out of every ten customers. It just gives you a clearer idea of what a price increase could mean, before you assume that losing any work would leave you worse off.
Our Price Increase Calculator
So as we often tell our clients, let’s start with your numbers.
Use the calculator below to try a few scenarios. Enter your average price per job, the direct costs of delivering it, and the increase you’re considering.
Price increase calculator
How much work could you afford to lose?
Enter your numbers to see what a price increase could mean for the work you need to win.
Example figures are shown. Replace them with your own. Nothing you enter is stored or sent anywhere.
A note on the numbers. This calculator is a guide, based on the figures you enter. It assumes your direct costs per job and total overheads stay the same. It shows how a price change could affect the amount left to cover overheads and profit. It doesn’t predict how customers will respond or guarantee a profit outcome. Consider your own costs, capacity and circumstances before making pricing decisions. General information only.
Obviously, this is just a starting point. The calculation assumes your costs per job and overheads stay the same, so think about whether that holds true for your business and then test it.
Try the new price on a group of comparable new quotes. Keep track of what you’re winning, what you’re making, and what customers are saying.
How to Test Your Next Price Increase
- Test the new price on a defined group of comparable new quotes.
- Record the price, whether the quote was accepted, and the expected margin.
- Review the results together with capacity and customer feedback before deciding what to do next.
You don’t need to find the perfect price in one go. But you do need to give yourself something more useful to work with than a guess about what customers will pay.
Are You Charging Enough?
Worried about losing customers if you raise your prices? If you’re winning nearly every quote, you could have more room to move than you think. Watch on as Joe explains how testing your pricing and reviewing it regularly can help protect your margins.
