Most SME price lists were built once, based on a mix of intuition, competitor watching and whatever the market seemed to accept. After that, they were nudged up with general increases, whenever there was the nerve to apply one.
In the meantime, minimum wage rose, insurance rose, software got more expensive, and the time each job takes changed. The margin you think you have and the margin you actually have can be quite far apart.
The quick test
Pick the three services or products that carry the most weight in your revenue. For each, calculate the current direct cost — materials, subcontracting, and hours at real hourly cost, including the 23.75% employer social tax, work-accident insurance and the fourteen-payment structure.
Compare that against the price charged. If any of them has a contribution margin below what the company needs to cover overhead, there's a problem no increase in volume fixes — selling more just increases the loss.
The costs that always slip through
- Time spent managing the relationship. Meetings, clarifications, calls. At a services SME this is easily 10 to 20% of billable time, and almost never in the price.
- Accepted rework. Out-of-scope changes made "so as not to cause a problem."
- The cost of financing the payment term. A client who pays at 90 days costs real money, as detailed in the cash conversion cycle.
- Client-specific admin cost. Dedicated portals, purchase orders, split invoicing, required reports.
Raising prices without losing the client
Three ways, in order of how much friction they generate:
Indexation written into the contract. An annual review clause turns a negotiation into applying a rule. That's why it's worth including in new contracts, even if the company doesn't intend to use it every year.
Scope review. Keeping the price and adjusting what's included is often easier to accept than a direct increase, and has the same effect on margin.
A direct increase, justified and announced in advance. Communicated two to three months ahead with a concrete reason, client loss rates are far lower than feared.
The disproportionate fear
The fear of losing clients by raising prices is almost always bigger than the actual loss. And there's an asymmetry worth doing the maths on: with a 60% contribution margin, losing 10% of clients to a 10% price rise still leaves the company earning more, with less work and less overhead in use.
This isn't an argument to raise prices blindly. It's an argument to run the numbers before deciding you can't.