Pros & Cons of Announcing Price Increases

Did you raise prices this season? With rising costs from suppliers, an increase in rent, employee wage increases, an underbid job or add-on services, serving higher costs to the customer is sometimes inevitable. How do you handle price changes with your customers? Some contractors find that taking the time to acknowledge price increases before the new invoice arrives is beneficial to the relationship with the customer. But, be wary. Commercial clients may react differently than residential clients to price changes in a contract without a warning. This LawnSite member is looking for advice on announcing rising prices.

ATL123: I have an apartment complex I’ve been mowing for many years without a price increase. I’m raising prices 10 percent this year, as my crew’s wages have risen to the point where the margins are thin now. I usually just mail the contract at the end of January and the complex signs and returns it. I rarely talk with anyone unless there is an issue. Should I just mail the contract as usual or should I add a letter explaining the price increase? Or a phone call? What would you guys do?

BigJlittleC: Do what you usually do. Send renewal with price increase.

lawntennis: Send the renewal with the price increase. Don’t explain, justify or draw attention to the change. No other business apologizes for price increases. Price increases are a fact of life. They won’t ask why.

Utah Lawn Care: Let them know and give good reasons why you need to increase prices. Start the work as usual unless told otherwise.

RedSox4Life: Face to face is a good idea, but may be impractical. Maybe plan to include a letter along with the first or final invoice for the year/season?

brianslawncare: I had a high-end development for years that consisted of 10 1.5- to 2-acre homes. On the third or fourth season, I raised the price without telling the development — I just put it on the bill. I raised it three dollars and, wow, what an issue. Let’s say I don’t have them as a customer anymore. I dropped them because there was too much drama, and I had a hard time getting paid. You’d be better off telling them upfront.

ShowCaseLawnCare: I wouldn’t raise prices more than a few dollars unless it’s something you’ve underbid or something you don’t want to do. You don’t want to lose good customers over a few bucks. That’s just my opinion.

jc1: We raise prices about every two to three years. We have never sent a letter, card or phone call notifying them of an increase. We mail or email invoices. Customers typically expect prices to change over time. Don’t go up too much at any one time. Rarely has anyone called, commented or complained.

McFarland_Lawn_Care: I’m increasing prices as well. Some were underpriced. Most have expanded their lawn areas. I’m going to write letters and say that we have re-assessed each property and priced accordingly. I’m also going to add that a part of the increase will be for added benefits for our employees who work so hard to keep their properties looking amazing. I think that’ll go a long way. This depends a lot on your clientele and your relationship with them! I have mostly residential and medium to high-end customers, so relationships are important and upfront, honest pricing is the best. We have agreements signed so whenever there needs to be an increase, we send out new agreements reflecting the updated price for signatures. If you feel a reason will help, then include one. If not, don’t sweat it, move on and be prepared to lose the price shoppers. No big deal — it’s a good thing! Feel free to message me for more info or advice on wording — glad to help as much as I can.

Darryl G: I just increase them these days and they find out on their invoice. Depending on the customer I may put a note on it alerting them to the increase and ask them to contact me if they have an issue with it. I used to send out a “happy spring” letter every season with a new agreement and a note that they may see small increases in their rates. I don’t bother with agreements at all anymore since most of my customers have been with me for many years and know the routine of how I do things. It’s to the point it’s just assumed that I’m still their lawn guy unless they tell me otherwise and I bill them as I see fit.

GRANTSKI: As far as raising prices, last season I just put the new prices on the first bill. No complaints. But I only increased a handful that were underpriced and they probably expected it. I had an idea to raise rates across the board but add an extra service: maybe a complimentary spring fertilizer service or something else that’s low cost and that all customers will appreciate.

Quick Clips

According to the Small Business Administration, there are three primary cost factors that every small business needs to determine when charging for its goods or services: labor costs, material costs and overhead costs. But, you can’t ignore what your competition is charging, either, says Judy Guido, an industry consultant based in Moorpark, California. “If you can articulate what your value is worth, you can command higher fees,” Guido says. “You need to prove to your customers why you are worth that extra 20 percent. When my clients are doing a good job, they stick out like a sore thumb separating themselves from their competition.”

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