Most contractors raise prices too late, by too little, and then apologize for it. The signals that say you are overdue are countable rather than emotional: you are winning nearly every bid, you are booked out for weeks, your costs have moved and your price has not, or you are busy and still short of cash. Raise the number on new quotes only, give existing customers a dated notice, and say it in one plain line without justifying yourself. Here is when, by how much, and the exact words.
The signals that say you are already overdue
None of these is about how you feel. Each one is something you can check this week.
You are winning almost every job you quote. A win rate near the top is not a compliment, it is a price signal. If nobody ever says no, you are the cheap option and you are leaving money on every job. Losing some work on price is normal and healthy. The contractors who never lose a bid are usually the ones working hardest for the least.
You are booked weeks out and turning work away. Demand above capacity is the clearest possible signal. When you cannot take the next job anyway, a higher price on the one after it costs you nothing and changes what the year is worth.
Your costs moved and your price did not. Materials, fuel, insurance, your license and bond, your software, your comp premium. Every one of those moves without asking you. If you have not rebuilt your rate since the last time they did, you have taken a pay cut without noticing.
You are busy and still short of cash. This is the dangerous one, because it looks like a cash-flow problem and it usually is not. Most trade businesses that go under were busy the whole time. If the work is constant and the money is not, the price is the first place to look, not the invoicing.
You are more skilled than you were. Certifications, a license upgrade, years of clean work, references, insurance limits nobody else on the bid carries. Those are worth money and they do not raise your price by themselves. You have to do it.
You are dreading certain customers. The bottom of the market is hard graft, thin margins, higher risk and very little upside. A price rise is the cleanest way to change who calls you, and it works quietly.
Rebuild the number rather than adding a percentage
The instinct is to add a few percent to what you charged last year. The problem is that last year's number may have been wrong to start with, and a percentage on a wrong number is a wrong number.
Build it again from the bottom. Your price has to cover your labor, the payroll burden on that labor, your materials, and a share of your overhead, and then carry profit as its own line on top. How to price your work so you actually make money walks the whole stack, and two lines in it are where the money usually hides.
The first is the billable days line. You are not paid for 261 working days a year. Take out vacation, sick days, training, weather and the days you spend quoting and doing paperwork, and roughly 187 are left to carry the whole year. Price off 250 days when you can bill 187 and every rate you quote is about a quarter too low, whatever else you got right.
The second is overhead, which for a small contractor commonly eats 25 to 50 percent of revenue. Truck, fuel, tools, insurance, phone, software, licensing. It is real money and it does not appear on any single job, which is exactly why it goes missing from prices.
Then watch the markup and margin trap on the way past, because it quietly costs money every time. Mark $1,000 of cost up by 20 percent and you sell at $1,200, but $200 of $1,200 is a margin of 16.7 percent, not 20. A common target is 15 to 20 percent net profit after every cost including your own wage. What Should I Actually Charge? will do the arithmetic if you would rather not.
If you have crew, the same rebuild has to run through their cost too. A worker on $25 an hour costs you somewhere in the low to mid thirties once you add your half of Social Security and Medicare at 7.65 percent, unemployment tax, workers comp and general liability, and that is before you allow for the paid hours you cannot bill. Labor burden of 30 to 50 percent on top of the wage is the normal range in construction. What does a worker actually cost me per hour once they are on the books? has the worked example.
How much, and how often
Once a year, deliberately, on a date you pick, is the pattern that works. It stops the rise being a reaction to one bad job and it stops you going three years without one.
Between annual reviews, raise the price when the work changes rather than when the calendar does: a customer who is more demanding than the job you quoted, a job type you have got faster and better at, or a class of work you would rather stop doing.
On size, the honest answer is that there is no correct percentage, because it depends entirely on how far under you were. What is worth knowing is that the fear is nearly always larger than the effect. If a rise loses you a small share of your least profitable customers and lifts every remaining job, you can work fewer days for more money. Run that arithmetic before you decide the number is too frightening: take your current job count, cut it by the share you think you might lose, and multiply by the new price.
The other honest thing to say is that raising the price later is much harder than starting right. A rate you set low to win early work is a rate you will fight to climb off, because every one of those customers now has an anchor in their head. Your first quote: how not to undersell yourself on day one is the guide for anyone still early enough to avoid this problem instead of fixing it.
Telling customers, in one line
The rules are simple and the hardest one is the last.
New quotes get the new price with no announcement. A quote is a fresh offer. There is nothing to explain to somebody who has never seen your old number.
Repeat customers get notice. Tell them before the next job rather than on the next invoice. A dated line in an email is enough:
From March 1 my day rate is $X. Anything I have already quoted stays at the price I quoted.
Anything already quoted stays quoted. Honoring an outstanding quote costs you one job and buys you a reputation. Put an expiration date on future quotes instead, which is standard practice and belongs in the estimate anyway.
Do not apologize and do not over-explain. This is where most people undo the rise. A long justification tells the customer the price is negotiable and invites them to argue with your reasoning. State it, then stop talking. If they ask why, one honest sentence is plenty: costs have gone up, or this is my rate for this year. You are not asking permission.
Do not blame inflation forever. It works once. After that it sounds like a script, and it also frames your price as something that happened to you rather than something you decided.
If a customer pushes back, that conversation has its own guide: How to explain your price when they say "that's a lot". The short version is that you explain what is in the price, in their language, rather than defending the number.
What to expect afterwards
Some customers will go. Usually the ones who were only ever there for the price, and usually the ones who were hardest to work for. Some will not notice at all, which happens more often than anyone expects. A few will ask, get a straight answer, and book anyway.
What you should watch is not how many say yes, but what the year looks like. Fewer, better-paid jobs with less arguing is a good outcome even when the job count falls. More money on the same volume is the obvious one. And if literally nobody objects and you still win everything, the rise was too small and you now know exactly what to do at the next review.
Bank some of it rather than absorbing it into the running of the business. Three months of overhead held in reserve is the target in Managing cash flow in a feast-or-famine trade, and a price rise is the easiest time to build it.
Where to go next in this section
- How to price your work so you actually make money, the stack to rebuild the number from.
- Why you should never be the cheapest bid, and what a cheap price tells the customer, which is the same argument from the customer's side.
- How to explain your price when they say "that's a lot", for the pushback.
- Day rate, fixed price, or time and materials: which should you quote?, because the model you use changes how a rise lands.
- How to write an estimate that wins the job and protects you, where the expiration date goes.
- Pricing a Job: Cost Checklist, to make sure nothing is missing from the new number.
Common questions
How do I know when to raise my prices?
Look for signals you can count rather than a feeling. You are winning nearly every job you bid, which means you are the cheap option. You are booked weeks out and turning work away, which is demand above capacity. Your costs have moved and your price has not. You are busy and still short of cash, which is a price problem far more often than a billing problem. You have added skills, certifications or insurance limits that other bidders do not carry. Any one of those means you are already overdue. The pattern that works is a deliberate annual review on a date you choose, plus a rise whenever the work itself changes.
How much should a contractor raise prices by?
There is no correct percentage, because the right rise depends entirely on how far under your number was. Rebuild the price from your costs rather than adding a few percent to last year, because a percentage on a wrong number is still wrong. Cover your labor, the payroll burden, materials and a share of overhead, then add profit as its own line, commonly targeted at 15 to 20 percent net. Then test your fear with arithmetic: cut your job count by the share you think you might lose, multiply by the new price, and compare. Most contractors find they can work fewer days for more money.
How do I tell customers about a price increase?
New quotes simply carry the new price and need no announcement. Repeat customers get advance notice before the next job rather than a surprise on an invoice, and one dated line in an email is enough: from this date my rate is this, and anything already quoted stays at the quoted price. Honor every outstanding quote. Then do the hard part, which is to stop talking. A long justification tells the customer the price is negotiable and invites them to argue with your reasons. If they ask why, one honest sentence covers it.
Will I lose customers if I raise my prices?
Some, and usually the ones you least want. The customers who leave over a price rise are typically the ones who were only ever there for the price, which is also the group that brings the thinnest margins and the most disputes. Plenty of customers do not notice at all. The number to watch is not how many stay but what the year is worth: fewer, better-paid jobs with less arguing beats more work at a rate that does not cover your overhead. If nobody objects and you are still winning everything, the rise was too small.
Should I honor a quote I gave before the increase?
Yes. A quote you have given is an offer the customer relied on, and withdrawing it over a price rise costs you far more in reputation than the job is worth. Honor it, then stop the problem repeating by putting an expiration date on every quote you write from now on, which is standard practice and belongs in your estimate template anyway. Thirty days is common. After that date the quote lapses and a new one carries current pricing, so you never have to have this conversation again.
The honest bit
- There are no dollar figures for what to charge in this guide, and no percentage for how much to raise by. Both depend on your costs, your trade and your area, and any national number you read is somebody else's average.
- The 187 billable days, the 25 to 50 percent overhead range and the 15 to 20 percent profit target are this site's worked assumptions, published so you can change them, not benchmarks anyone enforces.
- The 30 to 50 percent labor burden and the 7.65 percent employer FICA share are 2026 US figures. Verify payroll rates at irs.gov before you build them into a rate.
- Nothing here is a survey of what other contractors did after raising prices. There is no reliable US figure for that, so this guide gives you the signals and the arithmetic instead of a statistic.
- This is general guidance, not legal, tax or financial advice.
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