Dear Dave: My husband has his own one-man painting business, and I help him with the books. We were wondering how you know when it’s time to implement a price increase. Also, what should the increase be?
Dear Lauren: I grew up in the real estate business, so I’ll use the apartment-complex model as my example. If your building is completely full, then it’s time to raise prices a little bit until you have a vacancy. In this type of scenario, you want a healthy level of vacancy, meaning you’re always going to be losing some customers as you go up in prices.
In your husband’s case, if he’s booked through the end of the month, he’s way underpriced. Just keep on turning in your bids, and don’t make a big deal about things. It isn’t like a tenant, in your case, where you’re going back time and time again except in rare cases. You might start with a 10 percent increase, and see what happens for a while. If that goes well, wait a bit and raise them another 10 percent.
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There are only so many hours in a day this guy can work, so the only other option is to take on staff. But before I start staffing, I’m going to raise prices and cut the number of customers that way. In most cases with the construction business, if you show up when you say you will, complete the job when you say you will, and you do high quality work, there’s almost no ceiling on what you can make!
Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.