Is Your Business Charging Enough For Goods & Services?

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 754 words

Many established companies charge less than their customers would pay, and a modest, well-planned price increase is often the fastest way to lift profit. Because a price increase adds revenue without adding cost, most of it lands on the bottom line. That makes pricing one of the first things an experienced buyer studies, and one of the first things an owner should fix before a sale.

Whether you own the company or are weighing an offer for it, the question is the same: are current prices set by what the product or service is worth to the customer, or by habit?

Why a small price change moves profit so much

Take a hypothetical company with $10 million in revenue and $1 million in annual profit. If it raises prices by 2% and keeps the same volume, revenue grows by $200,000, and almost all of that is new profit, because labor, materials and rent did not change. Profit rises by about a fifth. Finding the same gain by cutting costs would be far harder. The reverse also holds: a 2% discount with no gain in volume takes the same $200,000 straight out of profit.

Buyers value companies on a multiple of earnings, so the effect carries into the sale price. MDR & Associates most often sees companies in the $3 million to $100 million revenue range valued at three to seven times adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, after removing owner-specific and one-time items). Every added dollar of sustainable profit is worth several dollars at sale.

Signs that prices are too low

One or two of these signs is common and may be harmless. Several together suggest prices have drifted below what the market will bear, and that the business is giving away margin on work its customers would willingly pay more for.

• Prices were last reviewed years ago and are set as cost plus a fixed markup.
• Customers rarely push back, and almost every quote is won.
• Competitors with similar service charge more and still stay busy.
• Long-term contracts have no price escalator, so margins shrink whenever costs rise.
• Salespeople discount to close a sale without needing anyone's approval.
• Rush jobs, small orders and add-on services are priced the same as standard work.

How a buyer should test pricing headroom

A seller who says prices could go up is describing an opportunity the seller chose not to take. Ask why. Sometimes the answer is comfort or loyalty to long-time customers. Sometimes it is a competitor, a contract or a large account that would leave. Before you give the idea any weight, look for evidence: the history of past increases and what happened to volume afterward, gross margin by product line or customer, contract terms that fix prices, and how concentrated revenue is. A customer that buys a large share of output can usually refuse an increase.

Then treat pricing upside as yours, not the seller's. Pay for the earnings the business produces today, and let any increase you carry out after closing be your return for the risk you take. Buyers who register through our buyer page see companies with that history laid out in the financial recast.

What owners should do before selling

If you plan to sell in the next year or two, test your prices now rather than leaving the upside to the buyer. Raise prices in steps, start where margins are thinnest, and track retention. A year or more of higher margins with steady customers is evidence a buyer will pay for; a claim that prices could rise is not. Pricing is one of the more practical ways to increase your business valuation in the next year.

Look first at work customers value most and compare least: emergency calls, specialized parts, fast turnaround, small custom orders. Those are usually the places where a higher price meets the least resistance.

Keep a record of each change and the reason for it. Buyers and their accountants will ask, and a clear account of deliberate pricing reads far better than a sudden jump in the final months before a sale.

How MDR & Associates looks at pricing

When we prepare a company for market, the financial recast shows margins by line and highlights pricing that looks out of step with the market. For owners, a business valuation turns the effect of pricing into dollars. If you want to talk through what your prices are doing to your value, or to a company you are considering, start with our contact page.

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Questions owners ask next

Will customers leave if I raise prices?

Some may, which is why increases should be tested in steps. Start with smaller customers, add-on services or new quotes, and measure volume and retention over a few months. If losses are small, the net effect on profit is usually positive. A large customer with alternatives needs its own conversation, often timed to a contract renewal.

Should a buyer pay more for a company that could raise prices?

Generally not. Upside the seller has not realized is not yet earnings, and valuations are built on earnings. A buyer may compete harder for a company with clear pricing power, but the base price should reflect today's results. Increases already made, with proven customer retention, are different; those count.

How long before a sale should I change prices?

Ideally at least a year ahead, so buyers see a full period of results at the new prices and can check that customers stayed. Increases made in the final months before marketing look like an attempt to dress up the numbers and are likely to be questioned or discounted in due diligence.