When did you last raise your prices? I ask owners that early, because the answer tends to arrive with the same worry attached. The version I hear most often goes almost word for word like this: “I’ve had the same prices now for my product or service for three years. If I raise them, I’ll lose my clients.” It usually sits right next to a second worry: how to grow the business without adding a lot of overhead. Owners rarely see that the two are connected.
I understand the fear, and I don’t think it’s foolish. A good client is expensive to win and painful to lose. But while the price sat still for three years, the wages, the materials, the insurance, the software and the rent around it all went up, and the gap between what the work costs you and what the client pays has to land somewhere. In my experience the client is the last place it lands.
The usual advice to a nervous owner is to hold steady while things are uncertain, keep the clients happy and wait for a better moment. I think that advice gets the risk backwards. Holding the price is a decision too. It decides who covers the difference, and it gets made again every month the price doesn’t change, whether the owner meant to make it or not.
Thinking out of the box requires two people because the instructions on how to get out of the box are written on the outside of the box.
— Gary Henson, Consultant
Bank of America’s 2025 Business Owner Report (opens in new tab) gives a sense of how wide that difference has been running. Ipsos surveyed 1,072 U.S. business owners for the bank between September 11 and 23, 2025: 819 small businesses with 2 to 99 employees and revenue under $5 million, and 253 mid-sized businesses with up to 499 employees and revenue under $50 million. Over the previous 12 months, 77% of those owners said their costs had gone up, by 18% on average. And 76% said they had raised prices, by 12% on average.
Those two averages need a careful read. They describe two overlapping groups, owners whose costs rose and owners who raised prices, so you can’t subtract 12 from 18 and call the result any one company’s lost margin. The owners answered for themselves; nobody checked their books. And the survey didn’t ask the question my clients are most afraid of, which is whether raising prices cost them customers. Nothing in it tells you how your clients would react.
What it does suggest is narrower, and I think more useful. Most of the owners in that survey did raise prices, and on average they still raised them by less than their costs went up. An owner who hasn’t touched a price in three years isn’t keeping pace with that group. He’s covering the whole increase himself.
average rise in costs that U.S. business owners reported over the prior 12 months; owners who raised prices did so by 12% on average. Bank of America, 2025 Business Owner Report (Ipsos, September 11–23, 2025, n=1,072) →
So who pays? The difference comes out of three places. The first is the owner, in take-home pay and in hours, which is usually the very thing he hired me to fix. The second is the money that would have paid for growth: the hire that gets put off, the training that gets cancelled, the equipment that limps along another year. That is the overhead worry again, seen from the cost side. You can’t grow without adding overhead when the margin that would fund the growth is being handed back to clients every month.
The third is your people. As I put it to owners, “The internal customer is the employee.” When the price can’t carry a raise, the raise doesn’t happen, and good employees notice long before anyone says a word. A price frozen for your outside customer has a way of becoming a wage frozen for your inside one. The same report found that among owners hit by labor shortages, 40% were raising wages to compete for people, so the employee you can’t give a raise to has somewhere else to go.
There is a limit to what I can promise you. Some clients will push back on a price increase, and a few may leave. I can’t tell you how many from a national survey, and I won’t pretend to. What I see is that the fear usually gets weighed against nothing. The owner can picture exactly what losing a client would cost, but has never put a number on what the frozen price is costing him every month. If the worry underneath is losing to whoever bids lowest, I’ve written about why competing on price is a losing strategy for most small businesses.
This is also hard to see from the inside. I tell owners that thinking out of the box requires two people, “because the instructions on how to get out of the box are written on the outside of the box.” A price you set three years ago and haven’t looked at since is one of those boxes. Pricing is part of the market work in our Inside-Out Method, and it comes after the owner is clear about who the business serves best, because that is what the price is supposed to reflect.
Before you decide anything, pull an invoice for the same kind of job from three years ago and one from last month. Next to each, write down what that job cost you to deliver: the hours, the materials, what you paid the person who did the work. Then go over the two together with someone who isn’t you, your bookkeeper, your general manager or an outside advisor. The numbers may show the price is fine and the clients you’re worried about were never at risk. They may show that you and your people have been paying for that price for three years. Which one it is, you won’t know until the two invoices are on the table.
