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Plain English·4 min read

Should You Raise Your Prices?

The unanswerable question is how many customers you'd lose. The exact one is how many you can afford to lose. On a 62% margin a 10% raise lets you lose one in seven before it costs you a cent — and a 10% cut makes you win one in five just to break even.

You can't answer that by guessing how many customers you'd lose, because nobody knows that number in advance, and the not-knowing is exactly what keeps the price frozen for years. There's a better question hiding inside it, and this one has an exact answer. How many customers can you afford to lose? Raise a price and some volume walks. The math tells you precisely how much can walk before the raise costs you a dollar, and everything you keep above that line is money you were leaving on the table.

The number you can actually calculate

Say a service you sell for $100 costs you $38 in the parts and labor that go into that one sale. The $62 left over is your contribution, the piece that covers your rent, your salary, and everything else that doesn't change whether you make the sale or not. That $62 on a $100 price is a 62% margin, and it is the only number this calculation needs from you.

Now raise the price 10%, to $110. Your cost per sale didn't move, so your contribution per sale climbs to $72. Here's the exact break-even. You can lose up to 13.9% of your volume, about one customer in seven, before the higher price stops being worth it. Sell to 86 of your old 100 customers at the new price and you make exactly what you made before. Keep 90 and you're ahead. Keep all 100 and the raise was free money you'd been declining.

Sit with how the margin drives that. A high-margin business can afford to lose a lot of volume on a price increase, because each remaining sale is worth so much more. A thin-margin business, a 20-point margin on high-volume goods, can afford to lose almost none, because the raise barely moves the contribution and the lost customers hurt right away. Same 10% increase, completely different tolerance, and the difference is entirely your margin. This is why a boutique law practice and a busy sandwich counter should think about a price increase in opposite ways.

Two numbers, and one of them is a fact

What makes this worth trusting is that the break-even is not a forecast. It falls straight out of your price and your cost, both of which you know, and it does not require guessing how customers will react. It's a fact about your cost structure, exact as arithmetic.

What customers actually do is the other half, and that half is a judgment, not a fact. Nobody can hand you the real number for how many you'll lose, and any tool that claims to is selling confidence it doesn't have. So the honest split is this. The math tells you the line you have to beat, exactly. You bring the judgment about whether you'll beat it, which is where knowing your own customers earns its keep. Are you the only game in town for what you do, or one of six? Are your regulars loyal because of price, or despite it? Those questions the arithmetic can't answer, and they are the real decision. The number just tells you how much room you have to be right.

The cut runs the same math, backward, and it's brutal

The mirror is worth seeing, because owners reach for a discount far more casually than a raise. Cut that same $100 price by 10%, to $90, and your contribution per sale drops to $52. Making back what you gave away takes more than a few extra customers. You need to win at least 19.2%, nearly one in five, just to break even, and every one of them has to be a customer you keep.

That asymmetry is the whole warning. A 10% raise lets you lose one in seven, while a 10% cut makes you win one in five to stand still, so the discount works almost three times as hard as the same-size increase. And it only pays at all if the customers it brings in are worth keeping past the first sale. A one-time deal-chaser who costs you 15% and never returns isn't a win, no matter how many of them show up. That is the point where what a returning customer is actually worth to you stops being an abstraction and starts deciding whether a sale is smart or a slow leak.

What to actually do with this

Pull one product or service. Find its real cost per sale, honestly, including the parts of your own time that go into that specific unit. Subtract to get your contribution, and that's your margin. Then run the increase you've been afraid to run and read the break-even it gives you back. For most owners the number is bigger than they feared, because they'd been imagining a cliff and the arithmetic shows a wide shelf.

The calculator does this in your browser from your own numbers, and it runs the cut in reverse so you can see the asymmetry for yourself. It won't tell you how your customers will react, because it can't, and neither can anyone. What it will tell you is exactly how wrong your guess is allowed to be, which is the number that turns a frozen price into a decision you can actually make.

Common questions

How do I know if I can raise prices without losing money?

Calculate the break-even volume shift, which is exact. On a 62% margin, a 10% raise means you can lose up to about 14% of your customers, roughly one in seven, before the increase costs you anything. Anyone you keep above that line is added profit.

How much volume can I afford to lose on a price increase?

It depends entirely on your margin. Higher margin means you can lose more, because each remaining sale is worth much more; a thin margin means you can lose almost none. The exact figure comes from your price and your cost per sale, no customer guessing required.

Why is cutting prices riskier than raising them?

Because the math is asymmetric. A 10% raise on a 62% margin lets you lose one customer in seven; a 10% cut makes you win nearly one in five just to break even, and only if those new customers keep coming back. A discount works almost three times as hard as the same-size raise.

Can a calculator tell me how many customers I'll lose?

No, and distrust any that claims to. What it computes is how many you can afford to lose, which is exact from your own numbers. How many you actually lose is a judgment about your customers and your competition, and it stays yours to make.

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