The real question behind "how much should I raise prices?"
There is no right increase to copy from a competitor or to repeat every spring out of habit. The right increase is the one that earns your own work back to the margin your costs and required profit demand, applied so you keep the customers and services worth keeping. Two owners in the same market, hit by the same wage increase, can land on very different numbers and both be correct, because their cost structure, productivity, service mix, and margin requirements are not the same.
This model is written for owners and senior leaders of established green-industry businesses that run crews, equipment, overhead, and a mix of recurring and project work. It is not a homeowner pricing guide, a startup’s first-rate calculator, or a market-rate lookup. If you already know roughly what your work costs and what margin the business needs, it shows you how to turn a cost, productivity, or margin change into a defensible price, and how to judge how much volume that price can afford to lose.
Raising every price by the same percentage each year, often a round number like five percent, is a tempting shortcut, but it tracks nothing in particular about your business. A flat increase can leave a thin-margin service underwater while overcharging a strong one, and it tells you nothing about which customers could walk without hurting you. What follows replaces the blanket percentage with your own economics.
When a price change is actually warranted
A price change is warranted when one of four things has moved:
* **Direct costs.** Labor, materials, equipment operating cost, or subcontractors have risen. For crew-based green-industry work, labor is generally the largest single direct-cost line, so a wage change tends to move the required price more than many other direct-cost changes.
* **Productivity.** Hours per job or crew output have changed. Better production can offset part of a cost increase; worse production adds to it.
* **Service mix.** Work has shifted toward services with different economics, so a blended old price no longer fits.
* **Target margin.** The margin the business needs has changed because business-wide overhead grew, required profit or owner return changed, or the old price never recovered enough in the first place. Overhead changes belong here rather than being loaded into the direct-cost input a second time.
Before you touch price, confirm that the problem is really a pricing problem. If jobs are profitable on paper but cash is tight, the cause may be billing timing or collections rather than price, and an increase will not fix it. Use the estimate-to-actual review and your cash forecast to tell a margin problem from a timing problem.
It also pays to keep the vocabulary straight, because a pricing decision is only as sound as the definitions behind it. Cost is what the work consumes, and price is what you charge. Markup and margin both describe the gap between them, but they are not the same arithmetic, and required profit is a return the business needs, not a cost line. Cost feeds price; price, markup, margin, and required profit are not themselves costs. If markup and margin tend to blur together for you, settle that distinction first.
The margin bridge: from your current economics to the required price
The clearest way to size an increase is to build a bridge, one step at a time, from what the work costs now to the price it needs, instead of reaching for a single percentage.
Start with the direct, traceable cost of the work: the labor, materials, equipment operating cost, and subcontractor cost that a job or a representative unit actually consumes. Your job-costing and productive-hour work already produce this number, and the model takes it as an input rather than rebuilding it. Overhead is recovered separately and should not be loaded into this direct-cost figure a second time.
Then decide the **target contribution margin** the price must produce. Contribution margin is the share of price left after direct cost, and it is what has to cover overhead recovery and leave the required profit. You set it from your own overhead and profit requirements; the model does not invent it for you, and it is not a cost.
With those two pieces, the required price follows directly:
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Required price = direct cost after changes ÷ (1 − target contribution margin)
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Apply the cost and productivity changes to the direct cost first, then solve for price.
**Illustrative example (numbers are illustrative, not benchmarks).** Suppose a representative maintenance visit currently prices at $200 and carries $130 of direct cost, so its current contribution margin is ($200 − $130) ÷ $200, or 35 percent. Two things have changed: direct cost is up 6 percent, and the business now needs a 40 percent contribution margin rather than 35 percent, because overhead has grown. The new direct cost is $130 × 1.06, or $137.80. The required price is $137.80 ÷ (1 − 0.40), or about $229.67, an increase of roughly 15 percent, not the 6 percent the cost increase alone might suggest. The extra comes from correcting a margin that was too thin to begin with.
Productivity can pull the number back down. If a route or crew improvement lowers that direct cost by 3 percent, the new direct cost is about $133.67, the required price is about $222.78, and the increase falls to roughly 11 percent. The point is not the specific figures. It is that the required price is built from your cost, your productivity, and your margin target, and each of those levers moves it.
How much volume can an increase cost you?
Knowing the price the work needs is only half the decision. The other half is how much of that work you can afford to lose at the higher price and still be no worse off than if you had held the old price at today’s costs.
For any increase you are weighing, the tolerance is:
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Maximum tolerable volume loss = price increase (in dollars) ÷ new unit contribution
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where the new unit contribution is the new price minus the same direct cost you are carrying now.
**Illustrative example (illustrative).** Take the visit above, still carrying $137.80 of direct cost, and suppose you are weighing a 15 percent increase, from $200 to $230. The price increase is $30. The new unit contribution is $230 − $137.80, or $92.20. The tolerance is $30 ÷ $92.20, about 33 percent. In plain terms, you could lose up to roughly a third of that volume at the higher price and still bring in at least as much total contribution as keeping the $200 price against today’s cost would have. Lose less than that, and the increase leaves you better off.
The comparison holds direct cost constant at its current level for both prices, so it isolates the effect of the price change itself, and it assumes you would keep charging the old price if you did not raise it. What it does not do on its own is account for capacity. If the volume you shed is work you can easily refill with better work, the increase looks even more attractive; if it is work you cannot replace and your crews would sit idle, the tolerance overstates how comfortable the loss really is. Read the number as a boundary, not a target, and do not treat one decimal place as precision your inputs cannot support.
One result can seem counterintuitive: for the same dollar increase, a thin-margin service tolerates _more_ volume loss than a strong one, because you give up very little contribution on each unit you lose. That is a reason to look hardest at raising price on your weakest work, not your strongest.
New work versus repricing existing work
The required price applies most cleanly to new work, where there is no incumbent price and no relationship to manage. Quote the price the work needs, and let the tolerance tell you how much bid volume you can afford to lose.
Repricing existing customers and renewing recurring work is the same economics applied differently. The required price does not change, but how you get there does. Existing customers carry a switching cost, a relationship, and an expectation of notice, so they are repriced one segment or one account at a time rather than by a single across-the-board number. Recurring contracts especially deserve a closer look at renewal, weighing the contract’s actual economics against the effort to renew, reprice, redesign, or replace it. That deeper renewal test is its own decision, and it is handled in the maintenance contract renewal resource. Here it is enough to keep new-work pricing and existing-work repricing separate, and to apply the increase where the economics, not the calendar, call for it.
Segmenting the increase with your own customer and service economics
Because tolerance and required price both depend on each service’s contribution, the answer is rarely one number for the whole book. Where you have contribution by service, division, or customer, use it. A service running well above its target margin may need little or no increase; one running below needs the most, and it can absorb more volume loss if some customers leave.
It helps to test more than one increase level. Model a smaller and a larger increase for a given service, read the required-price gap and the tolerance for each, and decide which one you can defend and apply. For each customer or service, that points to one of four actions:
* **Reprice** to the required price where the work is fundamentally sound and the tolerance gives you room.
* **Rescope** where the customer values the relationship but not the full price: reduce visit frequency, trim scope, or change the service so the economics work at a price they will accept.
* **Improve the production or economics** where the real problem is cost or productivity rather than price, so the required increase shrinks or disappears.
* **Walk** where even a fair price will not produce an acceptable margin and the work cannot be reshaped, especially if you can refill the capacity with better work.
Running your own numbers with the calculator
Use the price-impact calculator to work your own figures. Enter the current price and direct cost, the cost change and any productivity change, and the target margin, and it returns the required price, the resulting margin, and the volume-loss tolerance for the increase you are testing. Bring your actual job-cost and margin figures rather than the illustrative ones above, and run each meaningful service or segment on its own.
Treat the output as a starting boundary for judgment, not a verdict. It tells you the price the work needs and how much room an increase gives you. It does not decide, on its own, which relationships to keep or how to sequence the conversations.
If important parts of the analysis still rest on estimates, missing information, or costs you cannot yet trace to the work, close those gaps before committing to a number. If company-specific analysis would help, Profit in Bloom can help evaluate the increase using the economics of your business. [Request a Consultation]