Underpricing is one of the most common problems I run across in small service businesses, and I have some standing to talk about it, because I spent years doing it myself. Owners in this position go a very long time without moving their prices. Some of them have never moved them at all. When you ask why, the answers land in one of two camps.
The first camp is afraid. They have customers they have served for years, they know the relationship is built partly on the number at the bottom of the invoice, and they are convinced that touching it will send those people looking elsewhere. The second camp has turned the same behaviour into a virtue. They pride themselves on doing more for less, they hear from customers that nobody else works this way, and they have come to think of the low price as part of what they are actually selling. What the two camps have in common is that both of them get to the end of the year wondering where all the money went.
My own version was mostly the second one, with a healthy amount of the first mixed in whenever a renewal came around. I liked being the provider who never nickel and dimed anyone. It felt like a decent way to run a business, and for a while it even looked like one, because the customers stayed and the work kept coming in. What I was slower to understand was that I had made a decision about the quality of service I could afford to deliver, and I had made it without ever framing it that way to myself.
Two quotes have stuck with me on this, and between them they cover most of what I would want an owner in either camp to hear.
The first belongs to Jamie Brindle, a content creator I follow who talks mostly to freelancers. He gets asked constantly how much someone should raise their prices, and his answer is "Enough to lose some customers." There is a real test buried in that. If you put through an increase and absolutely nothing happens, no pushback, no awkward phone calls, nobody walking, what you have learned is that you left room on the table and you are probably still leaving some. A little bit of loss is the evidence that you found the edge of what your work is worth.
The arithmetic underneath it is friendlier than it looks. Raise your prices thirty percent and you may lose a few customers. You are not going to lose thirty percent of them. Nothing close to that has ever happened to me or to anyone I have watched do it properly. Even in a bad outcome where a tenth of your base leaves, you are still ahead on revenue, doing meaningfully less work to earn it, with capacity freed up for customers who value what you do. The realistic result of a price increase is doing less work for more money.
In my own experience I have rarely lost a customer over price. On the handful of occasions I did, they were almost always accounts I was making the least on, which tells you something about who was paying attention to the invoice and who was paying attention to the work. That pattern is consistent enough that I would treat it as close to a rule. The customers who leave over a price increase are, by definition, the ones for whom price was the main thing holding the relationship together.
The dread is out of all proportion to any of this. In the days before the letters go out, an owner will run the worst case through their head over and over, imagining a stack of cancellations and a quarter spent explaining themselves. The customers, meanwhile, open the envelope, look at the number, decide it is reasonable, and go back to whatever they were doing. Most of them raised their own prices last year without agonizing over it for a month. Most of them assume you have been doing the same, because that is how every other business they deal with behaves.
The second quote I am less certain about, at least in terms of who deserves the credit. I am fairly confident it came from Gary Pica, a regular speaker on the managed IT conference circuit, because I heard him say it more than once from a stage. I might be misremembering where I first picked it up, and I would rather hedge that than put words in somebody's mouth. The line is "I like my customers too much to not charge them enough."
It takes a second to land, and then it is hard to shake. Undercharging for your services eventually forces you to cut corners in order to keep delivering at the level you promised. That erosion arrives one small accommodation at a time. You postpone a hire for a quarter and cover the gap with the people you have. You keep a tool one more year past the point where it stopped serving you well. You skip the training, then skip it again. You take the after-hours calls yourself because paying somebody else to take them does not fit inside the margin. Every one of those choices is easy to justify on the day you make it. Stacked up over a few years, they are a decline in service.
What happens next is the part most owners never see clearly, because it happens quietly. You end up with a customer base selected for tolerance. The people who will accept mediocre service in exchange for a low price stay, because they are getting precisely the trade they signed up for. The people who genuinely want good service, and are willing to pay for it, leave. They rarely tell you the real reason on the way out. They tell you they are going in a different direction, or that a decision came from above, and you file it under bad luck and move on. Over enough time you have assembled a book of business made up of the customers who care least about the thing you are trying to be good at, and you have done it to yourself, one held price at a time.
If you truly want to provide great service, you need great people, great processes and great tools, which is most of how I work with owners in the first place. Every one of those is paid for out of what you charge. The service you promise and the price you set are the same decision made twice, and if the two ever drift apart, the promise is the one that gives way. Holding a price for a decade commits you to funding that promise with a steadily shrinking amount of money, while wages, insurance, software, fuel and everything else move up on a schedule that has nothing to do with your comfort level. Costs rise on their own. Prices only rise when you decide to move them.
I think the reason owners resist this is that pricing gets tangled up with how we see ourselves. We are sentimental about it in a way we are not about anything else in the business. The discount feels like generosity. The unchanged rate feels like loyalty. From the inside, charging enough looks a bit like taking advantage of people who trust you. Every one of those feelings is sincere, and every one of them costs your customers the version of your business that could have hired better, trained more, and answered the phone faster.
The lesson underneath both quotes is the same. Raise your prices regularly and you keep the good customers, lose a few of the wrong ones, deliver better service to the ones who remain, and make more money while you are doing it. Almost every owner who reads that will agree with it in principle before they get to the end of the sentence.
Agreeing with it is the easy half. If your last real increase went out ten years ago, the prospect of writing this year's letter is genuinely terrifying, and I have enough respect for that feeling to say it plainly instead of telling you to get over it. There is a way to work through it that does not involve holding your breath and hoping. That is what I want to get into next time.