When did you last raise your prices? A guide to protecting your margin

Most business owners can tell you, to the dollar, what they charged for their first job. Far fewer can tell you when they last changed it.

That is not carelessness. Pricing is one of those decisions that feels settled once it is made. You worked it out, it seemed fair, customers said yes, and you got on with the work. Meanwhile your wage bill, your insurance, your software subscriptions, your fuel and your ACC levies all crept up without asking your permission.

Spring is a good time to look at this. The financial year is a few months old, you have real numbers to work with, and there is enough runway before Christmas to make a change land properly.

The number that moves while you are not watching

Your margin is the gap between what you charge and what it costs you to deliver. It is not a number you set once. It is a number that erodes quietly every time a cost goes up and your price does not.

Here is the uncomfortable part. Margin erosion does not feel like a problem while it is happening. Revenue can be growing. You can be busier than ever. The bank account still looks fine because more work is coming through the door. The profit just is not what it should be for the volume you are doing, and it is hard to point at any single cause.

By the time it shows up as a cashflow problem, it has usually been happening for a couple of years.

What has actually changed since you set your price

Run through this list and be honest about how many apply to you since your last price review:

• Wages have gone up, either through the minimum wage moving or through paying to keep good people
• KiwiSaver employer contributions have stepped up
• ACC levies have shifted
• Insurance premiums have risen, often sharply
• Your software stack has grown, and each subscription has had its own increase
• Materials or stock cost more than they did
• Compliance and reporting takes more time than it used to

If your prices have held steady through all of that, you are absorbing every one of those increases out of your own profit. That is a decision, even if you never made it deliberately.

Work out where your margin sits now

Before you change a price, you need to know what you are working with. Two numbers are enough to start.

Gross margin. Revenue less your direct costs of delivering the work, expressed as a percentage. This tells you how much of every dollar you invoice is left to cover overheads and profit.

Margin by job or service line. This is where the useful information hides. Most businesses have one or two things they do that carry the business, and one or two that quietly cost them money. The averages mask both.

You do not need a complicated model. You need your revenue split by service or job type, and an honest allocation of the hours and materials that go into each. If you have been tracking jobs properly, the data is already there.

Deciding on the number

There are two questions people get stuck on: how much, and when.

On how much, start by working out what a price rise needs to achieve rather than picking a round number. If your costs are up 8% and your margin has not moved, you are not asking for more, you are catching up. Calculate the increase that restores the margin you originally set, then decide whether you want to go further.

Small and regular beats large and rare. A 4% lift each year barely registers with customers. Holding for four years and then asking for 18% is a conversation nobody enjoys.

On when, give yourself and your customers lead time. Announce a change with reasonable notice, set a clear effective date, and apply it consistently. Quoting new work at the new price while existing customers move across on a set date is usually the cleanest approach.

Do not skip the low-cost options

A price rise is not the only lever. Before or alongside one, look at:

• Removing the extras you have been giving away without charging for them
• Tightening scope so the price matches the work actually delivered
• Reviewing your own supplier pricing, since costs run both directions
• Dropping or repricing the work that consistently loses money

Sometimes the margin problem is not the price at all. It is that the job takes 30% longer than it did when you priced it.

The conversation is easier than you think

The fear of losing customers is what stops most price rises, and it is almost always overstated. Customers who value the work you do expect prices to move over time. They have put their own prices up. They are not surprised.

What matters is how you handle it: clear notice, a confident and brief explanation, no apology, and no long defence. Customers who leave over a fair increase are usually the ones who were least profitable to serve.

Make it a review, not a crisis

The businesses that never have a difficult pricing conversation are the ones that review pricing on a schedule. Once a year, at the same time each year, they look at costs, look at margin by service line, and adjust. It becomes a routine part of running the business rather than a decision that has to be forced.

Put it in the calendar now for the same week next year, and it stops being something you have to work up the courage for.

Where to start this week

Pull your gross margin for the last twelve months and compare it to the twelve months before that. If the percentage has slipped, you have your answer, and you have the beginning of a case for what needs to change.

If you would like a second set of eyes on your numbers before you make a call on pricing, we would love to help. Understanding where your margin is going is one of the most useful things you can do for your business this year.

Thanks, Prue and the Astute Mode Team