When a Melbourne Business's Numbers Say It Is Time to Reprice

Which numbers tell you a price rise is due?

Three of them, and all three come out of books that are up to date: gross margin month by month, how full your calendar is, and how many of your quotes you win. One bad month proves nothing. A pattern across a quarter usually does.

It's tempting to reprice on instinct, usually right after a supplier invoice that stings. The instinct can be right. The trouble is that it can't tell you how much, or on which work, and that's what the numbers below are for.

Gross margin, month by month

Start with gross profit. IRS Publication 334, the small business tax guide, gets there by taking returns and allowances off gross receipts to reach net receipts, then subtracting the cost of goods sold. Divide gross profit by net receipts and you have a percentage. For a retail or wholesale business, the publication describes it as the average spread between what the goods cost you and what you sold them for.

Put that percentage on one line for each of the last twelve months. If it drifts down while your prices stay put, costs have been rising underneath you, and every sale now keeps a little less than it used to.

There's a catch for anyone who sells services. Publication 334 says a business where selling merchandise isn't an income-producing factor doesn't have to figure cost of goods sold at all, so on the tax form its gross profit simply equals net receipts. That's fine for the return. For pricing it's useless, because it shows a margin of one hundred percent every month. To see a real margin, the books need job labor, subcontractors and job materials kept apart from rent, software and the other overhead.

How full the calendar is

Count the hours you sold last month and set them against the hours you could have worked. When you're near the top every week, with jobs booked weeks out and work being turned down, demand has got ahead of what you can deliver. That's when a higher price on new work is least risky, since losing a few quotes only frees up time you didn't have.

How many quotes you win

Keep a simple list of every quote: the date, the amount, and whether it was won. Without it you'll remember the jobs you lost on price and forget the ones that went quiet for other reasons. After a few months the list tells you whether price is really the thing holding you back.

Which situation are you in?

Find the row that sounds most like your last three months. If two fit, the margin row usually wins, because margin is the number that pays the bills.

The fourth row is the one people get wrong. When quotes go cold and margin is fine, cutting prices feels like the fix, but the books are saying the price isn't what's broken.

What changed in Florida on September 30?

The wage floor moved. Under Article X, Section 24 of the Florida Constitution, the state minimum wage rose to $10.00 an hour on September 30, 2021, then by a dollar each September 30 until it reached $15.00 an hour on September 30, 2026. After that, the same section ties yearly adjustments to inflation, measured by the CPI-W.

If you pay any staff by the hour near that floor, a job priced last summer was costed on the older rate. Take three recent jobs, redo the labor line at today's pay, and see what's left of the margin. The answer depends on how labor-heavy your work is, which is why it's worth doing on your own jobs rather than guessing.

September 30 is also the deadline for the county's business tax receipt. The Brevard County Tax Collector says business tax receipts are due on or before September 30 each year. Inside city limits there's a city receipt too, and the City of Melbourne business tax receipt page asks new applicants for a $25 nonrefundable application fee, which counts toward the first year's tax, and says to email or call its office to find out which rate applies. Both receipts are overhead, so book them with the rent and software rather than against any one job, or they'll drag down the margin on whatever job they land on.

Should you raise every price, or only some?

Usually only some. A blanket rise is easy to announce, and it also lifts prices on work that was already doing well while doing too little for the work that wasn't. Split margin by service line or by type of job, and the losers tend to stand out.

Sometimes the honest answer is that one service shouldn't be on the list at all. If a line has run below cost for a year and a modest rise wouldn't fix it, dropping it may do more for the business than any new price.

Is the problem price or markup?

For a shop or wholesaler, Publication 334 has a useful test. Compare your gross profit percentage with your markup policy. If they're close, the figure is probably right. A big gap, the guide says, may mean sales, purchases, inventory or another cost wasn't figured correctly, so find the reason before you touch the price list. A price rise built on wrong books just moves the error.

How do you get the books ready to answer this?

1. Reconcile every bank and card account for the last twelve months, so the totals are real.
2. Move job labor, subcontractors and materials into cost of sales, apart from overhead.
3. Work out gross margin for each month and put the twelve figures side by side.
4. Split the latest quarter by service line and mark any line well below the others.
5. Start a quote log and keep it going for at least three months.
6. After any price change, note the date and compare margin and win rate three months later.

That groundwork is ordinary business bookkeeping, done monthly. Reading what it says about a decision like this is financial consultation, and there's more on bookkeeping for Melbourne businesses on its own page. To talk it through, get in touch.