Is this gross margin or net margin?

Gross — revenue minus the direct cost of the work. Overhead does not change when you raise prices, so it stays out of this calculation and makes the case stronger rather than weaker.

What if I lose more than the break-even amount?

Then you were closer to the market ceiling than you thought, and that is worth knowing for the price of trying. Price rises are reversible in a way most business decisions are not, and the information you get is difficult to obtain any other way.

Should I raise everything at once?

Rarely. Start with the work that is furthest below where it should be, and with new customers, where there is no comparison to the old price at all. Existing customers on the old rate can move at renewal or at a stated date.

Free tool

How many customers can you afford to lose?

The fear that stops price increases is losing customers. This works out exactly how many you could lose and still come out ahead — and on thin margins the answer is surprisingly large.

Method reviewed by Darren Lim, US CPALicence CPA.74253602

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Raise prices 10% and you can lose

22.2%

of your volume before you are worse off. Most owners guess a small fraction of that — and if you are already turning work away, losing it is not a cost at all.

Revenue now$110,000/mo

Gross profit nowat 35% margin$38,500/mo

Gross profit at the same volumeMargin rises to 40.9% — the increase is nearly all profit, because your costs did not move$49,500/mo

Extra profit per month$11,000

Extra per year$132,000

Volume you can afford to lose22.2%

Keep this share and you break evenAnything above it is profit you were leaving behind77.8%

A 10% discount instead needsmore volume just to stand still. This is what discounting actually costs.+40.0%

The arithmetic nobody does before deciding

A price increase drops almost entirely to the bottom line, because the cost of doing the work has not changed. Ten percent more on the invoice is ten percent of revenue in pure profit.

Which means you can lose a meaningful amount of volume and still be ahead — and the thinner your margin, the more you can lose. On a 30% gross margin, a 10% price rise lets you shed roughly a quarter of your work before you are worse off. Most owners guess the tolerable figure at a fraction of that, and price accordingly for years.

The same arithmetic runs in reverse and is the reason discounting is so expensive. Cutting price 10% on a 30% margin requires winning about 50% more work just to stand still.

What it does not account for, and should not

Capacity. If you are already turning work away, losing a quarter of it is not a cost at all — it is a schedule you can actually service, with better customers on it. That makes a price rise unambiguously correct and most owners still hesitate.

Which customers leave. They are rarely random. The ones who go first are usually the most price-sensitive, the slowest to pay and the most demanding, which means the mix improves as well as the margin. That effect is real and this calculator deliberately ignores it, because it cannot be measured — treat it as upside.

Doing it without losing the good ones

Give notice, in writing, with a date. Existing customers accept an increase they were told about and resent one they discovered on an invoice.

Raise the categories where you are furthest below your break-even rate first — usually maintenance, warranty and anything quoted flat two years ago and never revisited.

And check the floor before you set the ceiling. If you do not know your break-even billing rate, an increase is still a guess, just a larger one.

Common questions

Is this gross margin or net margin?: Gross — revenue minus the direct cost of the work. Overhead does not change when you raise prices, so it stays out of this calculation and makes the case stronger rather than weaker.
What if I lose more than the break-even amount?: Then you were closer to the market ceiling than you thought, and that is worth knowing for the price of trying. Price rises are reversible in a way most business decisions are not, and the information you get is difficult to obtain any other way.
Should I raise everything at once?: Rarely. Start with the work that is furthest below where it should be, and with new customers, where there is no comparison to the old price at all. Existing customers on the old rate can move at renewal or at a stated date.

What we do about it

Margin reported by category every month, so you can see which work is furthest below where it should be and raise that first — rather than applying one increase across everything and hoping.