A price increase letter to customers should be one paragraph. It states the new rate, the date it takes effect, when prices last changed, one honest reason, and that nothing else about the relationship changes. It goes out the second week of December, effective January 1. That’s the whole letter. Everything longer than that is the owner apologizing, and customers can hear it.
We run an accounting firm, and we help clients write this letter every December, after the margin report has told them which service needs the increase and by how much. The letter is the easy part. Here it is.
Use this. Change the bracketed parts. Don’t add to it.
Starting January 1, our rate for [service] will be [new rate], up from [old rate]. This is our first increase since [year]. Our costs for [labor / materials / insurance, pick the honest one] have risen over that time, and the new rate lets us keep doing the work the way you’re used to. Nothing else changes: same team, same schedule, same terms. If you have questions, reply to this email or call me directly. Thank you for your business.
That’s it. Five sentences, six with the thank-you. Read it back and notice what’s not in it: no paragraph about the economy, no list of everything you’ve invested in, no discount offer for anyone who complains, no “we understand this may be difficult.” Those additions signal that you expect a fight, and they invite one.
The elements, and why each is there:
The second week of December, for a January 1 effective date. That timing isn’t arbitrary.
November feels early. The customer files it away, forgets, and is surprised by the January invoice anyway. January, on the invoice itself, feels like being ambushed, and it’s the version that produces angry phone calls. The second week of December gives two to three weeks of notice, lands before people leave for the holidays, and puts the change on the natural boundary of a new year, when everyone expects prices to move.
Two to four weeks is enough for most service relationships. Longer notice doesn’t reduce complaints; it extends the window in which customers think about leaving. If you have contracts with notice clauses, honor them, and send the letter at the earliest date the contract allows before January 1. For customers on annual agreements, the increase takes effect at renewal, and the letter goes out a month before their renewal date, using the same paragraph.
Owners expect a wave. What actually happens, in our clients’ experience, is closer to this: a handful of customers reply with a question, usually about whether the change applies to work already scheduled. One or two leave. The rest pay the new rate without comment, and most never mention the letter at all.
The scale of the reaction is almost always smaller than the owner feared, because the owner has been thinking about the increase for months and the customer thinks about it for the ninety seconds it takes to read the email.
The ones the margin report already flagged. When you build contribution margin by customer, or by service line, the customers who leave over a modest price increase are consistently the ones at the bottom of it: the most price-sensitive, the most demanding per dollar, the ones whose jobs the crew groans about. A price increase is, among other things, a filter, and the customers it filters out were costing more than they paid.
Which means the math on “we might lose a few” is usually better than it looks. Losing 5% of customers who were producing 1% of the contribution, while raising the price on the other 95%, is a large net gain. The margin report is what lets you say that in dollars before you send the letter, instead of hoping afterward.
The rate in the letter isn’t a feeling. A fractional CFO gets it from the margin report: this service line runs at 12% contribution, it needs to run at 25% to carry its share of overhead and a reasonable profit, and here’s the price change that gets it there after the customers you’d expect to lose. That’s the number that goes in the bracket.
Then the CFO writes down what it’s worth. A 10% increase on a line that’s 40% of revenue, less the expected attrition, is a specific dollar figure added to next year’s profit. Owners don’t send the letter because a percentage feels right. They send it because someone showed them the letter is worth a specific amount and takes one email. That conversation, in November, is usually the one that finally gets the letter sent.
We build the margin report as part of the monthly close, run the math on the increase in the November planning meeting, and draft the letter with the client in early December. The client sends it. In January, the new rate shows up on invoices we already reconcile, and the February margin report shows whether it worked. If you’ve known for a year that a price needs to change and haven’t sent the letter, reach out. We’ll tell you the number, what it’s worth, and hand you the paragraph.
What goes in a price increase letter?
The new rate, the effective date, when prices last changed, one honest reason, and a line that nothing else about the relationship changes.
When should it go out?
The second week of December for a January 1 change; November feels early and January feels like a surprise on the invoice.
Will customers leave?
One or two, usually the ones the margin report already showed were unprofitable; the rest pay without comment.
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