Let’s face it… Everything costs more these days. Materials, labor, fuel… it feels like every bill that hits your desk is higher than the last.
For service contractors, that means shrinking profits even while you’re busier than ever. You’re working hard, but the bank account doesn’t show it.
So, should you raise your prices? It’s a tough call. Nobody wants to scare off customers or risk losing jobs. Maybe you’ve already tried it and wondered if you handled it the right way.
The truth is, raising prices isn’t about greed. It’s about survival. The key is knowing when a price increase is truly necessary, how to do it the right way, and how to explain it to your customers without hurting your business.
In this article, we’ll walk through:
- When to raise prices
- How to use data to decide
- Alternatives to raising prices
- What to say to customers if you make the change
Let’s break it down…
Why You Should Raise Prices (When Necessary)
Let’s be real… raising prices isn’t about being greedy. It’s about keeping your business alive.
The cost of parts, materials, and labor has gone up across the board. If you keep charging the same rates you did a year or two ago, your profit margins are slowly shrinking, even if your top-line revenue looks the same.
That said, raising prices “just because” isn’t the right move either. Don’t follow the crowd or bump your rates without a reason. Instead, look at the actual numbers in your business. Track your gross profit on specific job types, and only raise prices where you truly need to in order to stay profitable.
In short: price increases should be intentional, not automatic.
You should be using real data to make decisions about pricing…
Use Data to Decide – Not Guesswork
Guessing at your pricing strategy is risky. You might be raising rates in the wrong place and chasing away business. Or worse, you could be leaving significant money on the table.
Instead of guessing, concentrate on gross profit margins by job type, not just your overall business. For example, maybe you’re a plumber and sewer line installs are still healthy, but your water heater jobs are eating away at profit due to increased water heater costs. Without that job-level financial view, you’d never know where the profit problems are.
You should have a target gross profit margin for each job type. If you need to hit a 60% gross profit on jobs with materials and a 75% gross profit on jobs that are straight service work, you should know these numbers. Here is a great article on understanding gross profit and how it affects hiring new technicians.
Diving into your data will tell you the jobs where your gross profit margin is healthy and weak.
That’s where tools like shwego make life easier. With everything tracked in one place, you can clearly see which services are profitable and which need a price adjustment.
Whether you’re a plumber, operate a pest control business, or do appliance repair, the bottom line is to raise prices only where the data proves you need to. Keep the rest of your pricing steady and protect your margins without scaring off customers.
Alternatives to Raising Prices
Raising prices isn’t the only way to protect your margins. Before you make that move, look for simple ways to tighten up your operation. You’ll stay competitive while putting more money in your pocket.
Improve efficiency in scheduling and dispatch.
Wasted drive time equals wasted money. With shwego’s job map, you can assign jobs to techs already near the service address. That means fewer gaps, less gas burned, and more completed jobs per day. This allows you to earn more revenue and spend less on payroll and fuel.
Eliminate wasted material costs.
Material waste drains profits. Track materials on every job in shwego to make sure your job costs stay in range. If you’re cost of goods sold (COGS) are running out of normal range, it may be an ordering issue, or even theft. Catching it early protects your bottom line.
Reduce unpaid invoices.
Nothing hurts more than doing the work but not getting paid. shwego makes it easy to generate invoices on the spot and send them right from the field. That means fewer forgotten jobs, faster billing, and less chasing down payments later.
How to Communicate a Price Increase
No one likes higher prices, but customers usually understand if you’re upfront. The key is honesty and keeping the focus on the value you deliver.
Here are a couple of simple scripts you can use:
“Due to rising costs of materials and labor, we’ve updated our pricing to make sure we can keep providing the same reliable service you count on.”
“We’ve held off raising prices as long as we could, but to keep delivering quality work, this small adjustment is necessary.”
The point is: don’t over-explain. Be clear, be confident, and always remind them that what hasn’t changed is the quality of your work and the reliability of your team.
Customers aren’t just paying for a service; they’re paying for peace of mind.
Key Take-Aways
- Don’t raise prices just for the “heck of it”
- Dive into the data to raise prices strategically
- Explore alternative ways to optimize profits
- Communicate clearly and succinctly
Need help understanding your numbers?
Shwego was built to help service contractors like you manage jobs, track job costs, and grow with confidence. Book a free demo to see how it works.
Until next time,
-Sam
