When and How to Raise Your Prices in FY27 (Without Losing Customers)

Underpricing is the most common, and most fixable, profit problem in small business. Costs rise every year on their own: wages move with award decisions, suppliers reprice, insurance and rent march upward. Hold your prices flat while all of that happens and your margin is being cut annually by default, without anyone actually deciding it. A new financial year is the natural moment to correct that. Here is when a rise is justified, why the arithmetic favours you more than the fear suggests, and how to do it without losing the customers you care about.

Holding prices flat is a decision too

Owners tend to frame a price rise as an aggressive act and leaving prices alone as the neutral, safe option. It isn't. Because your input costs move regardless, "no change" is a decision to absorb every one of those increases into your own margin. Framed that way, the question stops being "dare we raise prices?" and becomes "who should pay for this year's cost increases — our customers, in small increments, or us, in full?"

Why the maths is friendlier than the fear

The fear is mass defection. The arithmetic rarely supports it, for one structural reason: when you raise a price, your costs for delivering that sale don't change, so the entire increase falls through to gross profit. Even a modest rise therefore produces a disproportionately large jump in profit per sale — which means you could lose a meaningful share of customers and still come out ahead overall.

Run your own break-even before deciding. Take your current gross profit on a typical sale, recalculate it with the proposed new price, and then work out how many customers you could afford to lose before total gross profit fell back to where it started. Your accountant can do this in minutes from your existing figures. Two things consistently emerge from the exercise: the tolerable loss is larger than instinct suggests, and the customers most likely to leave over price are disproportionately the low-margin, high-maintenance ones. A well-handled rise is the only growth lever that costs nothing to pull and improves your customer mix as a side effect.

When a rise is justified

Any one of these is sufficient on its own:

• Your costs have moved since you last priced. They have: wages, super, inputs, insurance, rent.
• You're at capacity. Full books and a waitlist are the market telling you plainly that you're underpriced.
• Your value has grown. You're faster, better and more experienced than when the rate was set, and the rate hasn't noticed.
• Time has simply passed. If prices haven't moved in over a year, the review is overdue regardless of the other three.

How to tell customers well

Give proper notice (longer for large contracts than for casual customers) and pick a clean effective date such as the start of the financial year or the next renewal, which reads as orderly rather than arbitrary. State the change plainly and briefly: one or two sentences on rising input costs and continued investment in service, then the new pricing and the date. Resist the urge to grovel. An over-apologetic announcement invites negotiation; a matter-of-fact one gets filed.

Handle your most important relationships by conversation rather than email, and consider transitional arrangements selectively: honouring existing quotes, holding the current rate until a contract renews, or phasing the change for a genuinely strategic account. Selective generosity is a tool; blanket grandfathering just defers the problem.

Make it annual, not dramatic

Small and regular beats rare and spectacular. Customers absorb a modest annual adjustment without much thought; they react badly to a large correction after years of silence, because the silence taught them your prices don't move. An annual pricing review anchored to the new financial year (costs, capacity, competitive position, then the decision) should be a fixture in your calendar the same way insurance renewal is.

What to watch afterwards

Track two things in the months after the change: who actually left (and whether they were profitable), and your win rate on new quotes. If nobody leaves and the win rate doesn't budge, that is useful information too — it usually means the next review can be more ambitious. Pricing discipline compounds quietly into every other growth decision you make, because a business earning proper margins can afford to invest in the things that make it worth choosing.