The average contractor hasn't raised their rates in 2.3 years, according to a 2025 Contractor Growth Network survey — yet construction material costs increased 34% and labor costs increased 22% over the same period. If your prices haven't moved and your costs have, you're making less money on every job.
Most contractors avoid raising prices out of fear — fear of losing clients, fear of awkward conversations. That fear costs them tens of thousands of dollars annually. Contractors who raise rates systematically and communicate the increase professionally almost never lose good clients over it.
Step 1 — Calculate how much your costs have risen:
|
Cost Category |
2 Years Ago |
Today |
% Increase |
|
Labor (wage + burden) |
$________ |
$________ |
____% |
|
Materials (common items) |
$________ |
$________ |
____% |
|
Subcontractor rates |
$________ |
$________ |
____% |
|
Fuel / vehicles |
$________ |
$________ |
____% |
|
Insurance premiums |
$________ |
$________ |
____% |
|
Weighted average |
____% |
Your minimum increase should match this weighted average.
Step 2 — Check market rates — get 2–3 competitor quotes on a standard job type. If you're below market, you have room to raise without competitive risk.
Step 3 — Back into the price from your target margin:
Required markup = (Overhead Rate + Target Profit) ÷ (1 − Overhead Rate − Target Profit)
Example: 22% overhead + 12% target profit → (0.34) ÷ (0.66) = 51.5% markup required
If you've been applying 35% markup, the increase isn't optional — it's math.
|
Type |
Best For |
|
Across-the-board % increase |
Service work, T&M rates, recurring clients |
|
Project-by-project repricing |
GC work where every job is different — no announcement needed |
|
Phased increase |
Long-term clients — split a 16% increase into two 8% raises 6 months apart |
|
New client premium |
Charge new clients full rate; grandfather existing clients 6–12 months |
Subject: [Company Name] — 2026 Rate Update
Hi [Name],
I wanted to reach out personally before you see it in a quote.
Effective [date], our rates will increase by [X]%. This is our first adjustment in [X] years, and it reflects real increases we've absorbed in labor, materials, insurance, and fuel.
Specifically: labor rates in our market are up [X]%, materials are up [X]%, and our insurance renewal came in [X]% higher.
We've held rates as long as we responsibly could. This increase allows us to maintain the crew quality and reliability you've counted on.
Your current projects and any work already quoted are not affected — this applies to new proposals from [date] forward.
If you have upcoming projects you'd like to lock in at current rates before [date], let me know.
[Your name]
"Hi [Name], do you have 5 minutes? I wanted to call personally before you got a quote and were surprised.
We're adjusting rates [X]% starting [date]. We've absorbed two years of cost increases without raising prices, and we've hit the point where we have to adjust or start cutting corners — and I'm not willing to do that.
Your ongoing project and anything already quoted isn't affected. This is for new work going forward.
I also wanted to give you a chance to lock in anything you're thinking about doing this year at our current rates if you want to move quickly. Anything in the pipeline?"
"I understand. Our prices are not the lowest in the market.
What I can tell you is what you get: [specific things — crew that shows up on time, clean sites, no hidden costs, callbacks handled without argument]. Those things cost money to deliver consistently.
If you'd like, I can walk through the scope line by line to make sure we're comparing the same thing — contractors often quote different scopes.
But I'm not able to match a price that doesn't cover what it costs us to do the work right."
"I hear you, and I genuinely value how long we've worked together.
Here's the honest situation: I've held this rate longer for you than for any new client. The new rate still puts you below what I charge new work. I can't hold prices below my costs indefinitely — that catches up with quality, which serves neither of us.
What I can do is honor your current rate through [date 60–90 days out] for any work we start before then. After that, I need to move to the new rate. Does that work?"
"Heads up — our hourly rate is moving from $[X] to $[X] effective [date]. That's a [X]% adjustment, our first in [X] years.
Labor and overhead have moved a lot since we set that rate. This brings us in line with what it actually costs to put a quality crew on your project.
Nothing changes about how we work together or bill — same invoices, same detail, just the rate. Any questions?"
[SVG grouped bar chart: Expected vs. actual client loss — 10% increase: feared 18%, actual 3% | 15%: feared 24%, actual 5% | 20%: feared 31%, actual 8% | 25%: feared 35%+, actual 12%]
Contractors consistently overestimate client loss by 3–4x. The ones who leave are almost always the price-sensitive, high-maintenance clients you could afford to lose.
Revenue math on a 20% increase with 8% client loss:
More revenue. Less work. Fewer difficult clients. That's what a well-executed price increase looks like.
Don't chase them with a discount. Thank them professionally, don't match the competitor's price, and wait. Clients who go to a cheaper contractor and have a bad experience come back. Clients you discounted to keep have learned your prices are negotiable.