How to Raise Prices Without Losing Clients: A Data-Driven Approach for Service Businesses

Raising prices is one of the most uncomfortable decisions a business owner can make—especially in today’s economy. With labor costs rising, tariffs increasing expenses, and software and shipping fees climbing, many service providers feel stuck between protecting their clients and protecting their profits. On a recent episode of Pivot to Profit, Pam Jordan breaks down how to raise prices without losing clients—and why failing to do so can quietly drain your business.

According to Jordan, the biggest risk isn’t raising prices—it’s waiting too long. She shares a real client example where delayed price increases resulted in a $40,000 loss due to rising direct costs that were never passed on to customers. When expenses increase and pricing stays the same, profit margins shrink, leaving business owners with less cash to reinvest, pay down debt, or support growth.

Jordan emphasizes that successful pricing decisions are math problems, not emotional ones. To help business owners raise prices confidently and strategically, she outlines a three-part framework.

First, business owners must know their numbers. Understanding direct costs—such as labor, contractors, materials, shipping, and advertising—is essential. If the cost to deliver a service goes up, pricing must follow, or profitability suffers.

Second, client data matters. Not all clients should receive the same price increase. By evaluating client profitability, retention, communication volume, and overall relationship health, owners can determine who will tolerate increases easily and who may already be costing the business money. In some cases, a price increase can even help phase out misaligned or unprofitable clients.

Third, communication is key. Price increases often fail due to poor messaging—not the increase itself. Clients don’t need a detailed cost breakdown, but they do want clarity and confidence. Explaining what’s changing, why it’s happening, and when it takes effect builds trust and reduces pushback. Incremental increases over time are often far more effective than large, sudden jumps.

Jordan also cautions against common mistakes, including apologizing for price increases, offering discounts that erase profitability, and making blanket increases without strategy. Ultimately, raising prices isn’t about greed—it’s about sustainability.

As Jordan reminds listeners, it’s not about what a business makes—it’s about what it keeps. When pricing reflects real costs and real value, both the business and its clients are better positioned for long-term success.

EPISODE TRANSCRIPT

Pam Jordan (00:01.134)

Hello and welcome to today's episode of Pivot to Profit. Where we're going to talk about how to raise prices without losing clients. This is a topic that a lot of our clients are struggling with right now because prices are going up, labor is going up, tariff inflation, all the things. And they're trying to figure out how do they balance. And so that's what we're going to dive in today. But first, if you're a service provider who's trying to understand your numbers,

trying to make sure you don't get a surprise tax bill. My company, Pivot Business Group, we would love to help you. Just go to pamjordan.com and schedule a call with my team. All right, so let's dive in. If your costs are going up to fulfill, but you haven't changed your prices yet, the truth is you're actually costing yourself money. So the money that's coming out of the pocket, your pocket is just growing and growing and growing. We actually had a client recently

who had a lot of direct cost change in their business. And we were looking at the year end review of their financials and we realized that by them not doing the price increases fast enough cost them $40,000 because the lag time. So when your prices are going up and you don't pair that with your prices that you charge your client, it's just costing you as the business owner more money. Yes, raising prices can be risky.

but you need to raise them with data and intentionality and understanding your clients so that you can retain those clients, but also ensure that the money, that your profits don't go down. So let's start with why are, normal, look, prices are going up across the board. Go to the grocery store, gas is higher, bread, milk, eggs, everything is higher, labor is more expensive.

go out and hire someone right now. What you used to be able to get for $25 an hour now costs $27, $30 an hour. Software fees are going up. And what that does is if you don't also increase the prices that you charge for your services, it just shrinks your margins and there's less money coming to you via profit as the business owner, which limits your ability to pay down debt and to handle future growth. So here's what owners are saying. I know I should raise my prices, but I'm just scared.

Pam Jordan (02:19.33)

I don't know how much I should raise them. But the real problem isn't pricing, it's the lack of financial clarity. You can't find, you can't price confidently if you don't know what your numbers are. And that's what I see a lot of times when people come to us and we start and we do our analysis and we look under the hood and we, as CFOs engage with them to look at their pricing and we just realize that business owners are literally pulling prices out of the air, out of thin air to what to charge for their services.

and they're not backing it by data. So I'm gonna give you a three-part framework to help you raise your prices without losing your clients. So the first part is you must know your numbers. And I'm not saying this because I'm an accountant. I'm saying this because you need to understand how much to increase your prices too based on what your direct costs are. So first, you need to know how much it's costing you to fulfill on your services.

What are your labor costs? What are your contractors? What are your materials? Shipping has gone up for a number of our clients and they have just eaten that cost instead of charging it, increasing their prices to the clients and raising the prices. What other marketing costs have gone up? Advertising has gone up, pay per click. All those prices have gone up over time. So understand what your direct costs are. And again, like the client that I was talking about earlier, they had shipping costs. That's actually what got them is they have

a product that they were shipping and their third party shipper went up in prices and at the same time they did not increase their carry that cost to their client. And so the business lost the $40,000 because they didn't increase their prices because they weren't in real time watching their direct costs. So it's imperative to know what does it take for you to fulfill on whatever your service or product is, the direct costs. And if those go up, then whatever you're charging your client,

also needs to go up because otherwise your profit's gonna go down and that's money out of your pocket. Price increases are math problems, not emotional decisions. You need to understand your numbers, understand what your direct costs are and as your direct costs go up, you need to charge more. Not because you feel bad, not because you feel it's gonna hurt the client, but because it's a math problem. If your costs go up, what you charge your client needs to go up.

Pam Jordan (04:41.026)

So an action item for you is to look at the last three months financials and look at your direct costs, often called your cost of goods sold on your profit and loss or P &L or income statement, and figure out what has gone up over time and how can you make changes in real time in your business and in your pricing to accommodate for those price increases. The second thing is to look at your client data and to really test the tolerance.

One mistake that I see is people delaying making price increases. And so then just across the board, sending out a 10 to 15, 20 % price increase and scaring clients. That's not helpful. What's important to know is look at the client data. Look at your retention, upsells, payment behavior, volume profitability. We also rate our clients on yellow, red, green. Like, are they happy? Are they at risk?

Do they have, are they, is there an issue with them that one of our departments is working with? So it's not smart to raise prices on clients that are yellow or red, but praising prices on clients that are green works because they already know, like, and trust us. And they know that incremental increases are understandable over time. So not only is it important to know your direct costs, but also how your, where your clients in their journey with you. So who will tolerate a increase easily? Who's going to push back?

And who is already unprofitable because this is also an opportunity that if you have some clients that you're not really in love with anymore and you're not enjoying doing business with price increase time is a great way to weed out some of those clients that you're just tired of doing life with. So as you increase prices, you know, they're going to bail, which is a great excuse to respectfully part ways with those clients. So if losing a client would improve your clash cash flow. They're not really a

pricing problem, their margin problem. if losing a client, if you have too many clients weighted that are paying too low, it's just costing you more and more money. So look at who are your most profitable clients, who call you the least, who has this since the least amount of emails, those but are and are still getting results. Those clients can tolerate price increases and the clients that are very needy, lots of calls, lots of emails.

Pam Jordan (07:04.536)

Look at your profit margins. You're probably not making money on those because your customer service and your team is spending so much time nurturing those clients and answering those questions that it's costing you more than you think. So those clients really do need a price increase in addition to all of your hard costs, hard direct costs going up. So you can, by evaluating your clients and where they are on both happiness, but also profitability scale, you can identify

who you can do a price increase to and who will not tolerate it as well. And also who it's time to part ways with because you're just not in alignment. So a exercise here is to look at the profitability by client or service offering to really figure out who do we still wanna do business with? Because if your costs are going up, you don't need to be the only one that's losing money. You need to increase those prices.

So if you have people that are annoying and bugging your team and out of alignment with you, now's a great time to let them go. And if you have some clients that are really dialed in, really seeing value, a price increase isn't gonna scare them away.

Third is to create a narrative for why you're doing these increases.

When you go to the grocery store, you didn't expect the grocery store to explain why the eggs are more expensive. But when you are a service provider, the clients do want to know. They want an authentic and transparent reason of what's going on. So price increases fail when we communicate poorly and don't have a clear strategy of how to communicate them. Clients don't need a full cost breakdown. We don't need to share our P &L to say, now I have to pay Sally.

Pam Jordan (08:52.718)

$25 an hour instead of 20. We don't need to go in the weeds like that, but they do need clarity and confidence. So the narrative needs to be clear. What's changing? Why is it changing? If you're getting supplies from a supplier that's increased your costs, just let them know that. If you're having to deal with tariffs, just let them know that. This is about helping educate your client as well as to the change in the industry and what's going on.

and then be clear on when that change is gonna take effect. Give people time to get used to it. And what stays the same and what improves with these changes? A lot of times people just send out notices, oh, we're gonna get a 10 % increase and then clients freak out. But if you explain why it's happening, it's a much easier pill to swallow. And also small incremental changes over time are much easier to digest than a huge increase. We had a different client,

and the service-based hair business, and they needed to do some pretty drastic price increases. And the owner just felt really convicted that there was no way her clients would stay. They would go somewhere else. There's no way she could pay that much or charge that much for the service. And so what we did is we just did incremental changes. And so this month we're gonna do a 5 % and the next month a 5 % and then the next month a 5%. So instead of rolling out a full 20 % increase,

Each time the clients came in, it was just 5 % more, which was much easier to swallow than a huge increase all at once. And by the end of a year, we were able to get the prices where they need to be and get her profitability up because of the increase in her direct costs, specifically her people. as you're looking at how do you handle a price increase without losing clients, look at the clients and don't just blanket increase everyone. Look at them and figure out who can handle this.

and who can't and who doesn't need to be with you as a client anymore. But be clear on why you're doing it. Be confident in your doing with why you're doing it and be clear on when the parameters are going to change so they know that they have 30 days. They have two weeks next Monday. It's going to go up. They're clear on all of that. Now let's talk about some common mistakes that I see. First off, pricing is authentically.

Pam Jordan (11:18.836)

one of the biggest mistakes and challenges that we see when clients come to us. They are not pricing their services high enough because they don't understand their direct costs and they don't understand the effect of overhead and they're shooting too low for profitability. So it is imperative that you get this right. And some mistakes that I see is raising prices just across the board without explanation and not evaluating the clients and their temperature for this.

And that's when you lose clients that you don't want to lose. So it's imperative that you have a clear narrative as to why you're doing this price increase, how it's gonna affect them, when it's gonna affect them, and that you're only rolling out to clients that you feel can tolerate this. And if you have clients that you feel can't tolerate it, and they're not profitable clients for you, this is a great way to exit a relationship.

The next common mistake that I see with price increases is apologizing. You are a business owner. You do not need to apologize that your prices went up. If your supplier is now charging you an extra $5 apart, you need to carry that cost onto your client. Apologizing just confuses the narrative. Be confident and clear as to why you're doing it and continue to bring value with your products and services and the clients will stay.

The other problem and mistake that I see is waiting too long and then doing that huge jump. That's when people freak out. So small incremental jumps in real time are a game changer. So it's important to know your numbers, see what your clients can tolerate, and then just incrementally make those changes so that you can right the ship on your profitability and not lose out and it costs you money to perform those services. And also,

Oh, I see some people who struggle with money mindset. A mistake they make is also making price increases, but then stepping backwards and doing discounts. If it costs you $20 to fulfill on your service, you can't give a 10 % discount. You cannot reduce that $20. If it cost you $20, you have to add your profitability to it, and that's what you charge.

Pam Jordan (13:38.156)

And if you give discounts, just costing, you're taking money out of your own pocket, out of your own profitability. So make sure you understand your direct costs and not just discounts, because I've seen some clients that'll go out and do price increases and then the discount is more than what they just did the price increase for. So they're actually losing even more money than they were before the price increase. So really monitor your numbers when you're doing this and be really clear on what you need to charge.

This is where understanding what your breakeven point is on your products and services is really imperative. And that's some the some financial analysis that's helpful to understand that I have because of my direct costs, I can't charge below this or I lose money. So raising prices successfully requires three things. First, knowing your true costs. Second, understanding your client data and third, communicating with clarity and confidence.

what the change is gonna be, what the parameters are, and what it's gonna look like. Because it's not about what you make, it's about what you keep. And if your costs to fulfill on your services are going up and your price stays the same, your profit margin just keeps getting smaller and smaller. So it is so important that as your costs go up, so do your prices, so that your profit margin doesn't suffer. Because as the business owner, if the profit margin suffers, you suffer.

It's less money in the bank for you. Less money in the bank for you to take that next initiative, to hire that next person, to even take that next vacation. So be sure that when it comes time to price increases, that you're not just throwing numbers out to see what happens, but you're actually being intentional about calculating what do you need to charge? What are your fixed costs? And then what are your audience, your client base gonna tolerate?

And there's some clients that are legacy clients that don't take a lot of work and just aren't going to tolerate an increase. But as long as they're profitable and you're making money on them, then it's fine. But if you have a client that you're not making money on, it's time to give them a price increase. And most likely, it's time to increase prices across all of your clients, but it's imperative to know how much. Because you don't have to give a price increase of the same flat rate to everyone.

Pam Jordan (15:59.328)

If you have different tiers of offering, you can raise prices incrementally based on their tier. So you don't have to do a flat 5 % to everyone. You can do a 3 % for these people and a 5 % to these. There's different scenarios where you can do it. So if this is helpful and you're wondering, what are my numbers? How do I know what my costs are? Again, just go to pamjordan.com. We would love to talk to you about pricing and help walk you through how to properly increase your prices.

based on your direct costs to the clients that can tolerate it. And then also help you maybe decide which clients aren't profitable and who you don't need to be doing life with anymore. And that's an okay option as well. Thank you so much for listening today. Make sure you like and subscribe. Give us a thumbs up on the video. Again, pamjordan.com. If we can help. Remember, it's not what you make that matters. It's what you keep.