Price is the cheapest EBITDA you will ever find because it requires no capital, no acquisition, no new hires, and no eighteen-month integration plan. It requires a decision. I have run price programs at companies from fifty million in revenue to two billion, and in thirty years I have never once seen one fail for lack of analysis. They fail for lack of nerve. The spreadsheet is the easy part. The hard part is the CEO looking at the number, believing it, and sending the letter anyway.
I run a $1.5 billion PE-backed industrial company today. I chair another business near a billion. In every operating review I have ever sat through — as CEO, as chairman, as the guy the board sent in when things went sideways — pricing was the lever everyone agreed on in the meeting and nobody pulled afterward. This post is about why, and about what I actually do instead.
Price Is a Courage Problem, Not an Analytics Problem
Every company I have ever walked into had a pricing study somewhere. Usually more than one. A consultant did a waterfall analysis three years ago. Finance built a margin bridge last year. Sales has a spreadsheet with competitor list prices that everyone quietly distrusts. The data always exists. What does not exist is anyone willing to act on it.
Here is my test. Ask the leadership team a simple question: if we raised prices four percent across the board tomorrow, what would actually happen? You will get theories, anecdotes, and one story about a customer who left in 2019. What you will not get is evidence. That is because nobody has tried. The fear has never been tested against reality, so it has grown to fill all available space.
I have watched this movie from every seat — CEO, chairman, board member, the operator brought in mid-crisis. The plot never changes. Management knows the price is too low. Management can prove the price is too low. Management does not raise the price. Analytics did its job. Courage did not show up for work.
The Anatomy of the Fear
Pricing fear has three organs, and it is worth dissecting each one because they die in different ways.
First, the big account. Every company has one customer everyone is terrified of, and that terror sets pricing policy for the other nine hundred. I ran a business where a single OEM customer was about nine percent of revenue, and the fear of that account had frozen list prices for four years — for everybody. Nine percent of the revenue was holding one hundred percent of the pricing hostage. When we finally repriced, we handled that account separately, carefully, and in person. They negotiated hard, took most of the increase, and stayed. The other ninety-one percent barely blinked.
Second, the sales team revolt. Your salespeople will tell you the market cannot bear an increase. Understand what they are actually telling you: an increase makes their next conversation harder, and if their compensation is built on revenue rather than margin, you are asking them to volunteer for pain with no upside. That is not a character flaw. That is a comp plan doing exactly what it was designed to do. Fix the design.
Third, the competitor myth. The story goes that the moment you move, a competitor will swoop in and take the business at the old price. In real industrial markets this almost never happens, for a boring reason: your competitor has the same cost inflation you do, the same thin margins, and the same board asking why price realization is flat. When one player in a rational market moves, the others usually exhale with relief and follow. I have led increases in five different industries. I can count the true competitor undercuts on one hand, and every one of them came on business we should not have wanted anyway.
The Corridor Nobody Can Explain
Let me tell you about a diagnostic I run in the first month of every engagement, whether I am the CEO or the chairman. Take one product — one part number — and print every price at which it sold last year, by customer. Then explain the spread.
At one industrial company I worked with, we pulled a mid-volume machined component. Same part. Same drawing. Same box. It sold at a 22-point spread between the highest-paying and lowest-paying customer. Twenty-two points of gross margin, on identical material, and when we lined the customers up against the prices, there was no logic to it. The biggest customer was not the cheapest. The oldest customer was not the cheapest. The cheapest was a mid-sized account whose price had been set by a sales rep in a hurry eleven years earlier and never touched since.
That is not unusual. In most middle-market companies I see pricing corridors 15 to 30 points wide, and the width is not strategy — it is sediment. Decades of one-off deals, panicked quarter-end discounts, and grandfathered contracts nobody rereads. Here is the reframe that changes the room: the top of your corridor is not an outlier. It is proof. Somebody is already paying that price, for that product, today. The market has already told you what it will bear. Your only job is to move the rest of the corridor toward the truth.
The Arithmetic of Attrition
Now let us do the math the fear never does. Take a business with $100 million in revenue at a 10 percent EBITDA margin — $10 million of EBITDA. Raise prices 10 percent. If nobody leaves, revenue goes to $110 million and, because price falls straight to the bottom line, EBITDA doubles to roughly $20 million. That is the ceiling. Nobody hits the ceiling. So let us be pessimistic.
Say you lose five percent of your revenue — customers who walk over the increase. You keep $95 million of the old base, now priced up 10 percent, which is $104.5 million in revenue. You gave up $5 million of sales and gained $9.5 million of pure price. EBITDA lands around $17 million, up 70 percent, on a shrinking customer count. You raised profit seventy percent while losing customers. Read that sentence again, because it is the whole argument.
And it gets better, because attrition is not random. The customers who leave over a price increase are overwhelmingly the ones at the bottom of your corridor — the low-price, high-hassle, small-order accounts that 80/20 analysis flags every single time. In my experience the top quartile of customers typically generates 105 to 150 percent of total profit; the bottom of the book destroys the rest. When a price increase drives off the bottom, it is not a cost of the program. It is a feature. You are being paid to fire your worst customers, and they are volunteering.
How I Run a Price Program
Enough theory. Here is the sequence I run, and I run it the same way whether the company makes fasteners or software. It takes about ninety days from data pull to letters out.
Start with quartile segmentation. Rank every customer by profitability — real profitability, with cost-to-serve loaded in, not just gross margin. The quartiles get different treatment. Top-quartile customers get modest, well-explained increases and a relationship visit; you protect these people. Bottom-quartile customers get the boldest moves, because you win either way: they pay the new price and become profitable, or they leave and free up capacity for accounts that matter. The middle gets the standard program. One number for everyone is not fairness. It is laziness with a memo attached.
Worst customers first. This is deliberate sequencing, not just triage. Your team is scared, and the fastest cure for fear is a live-fire exercise where the downside is trivial. Send the first wave of increases to accounts you can afford to lose. Watch what happens. Almost all of them pay. A few grumble. A couple leave, and the P&L improves when they do. Now your sales team has evidence instead of folklore, and the second wave — the one aimed at real money — goes out with straight spines.
Fix Sales Comp Before You Touch a Price
This is the step everyone skips, and it is why most price programs are dead within two quarters. If your salespeople are paid on revenue, a price increase is a tax on them: harder conversations, same commission math, angry customers with their name on the account. They will not sabotage you openly. They will simply concede — a discount here, a freight waiver there, an exception that becomes precedent — and eighteen months later your realized price is exactly where it started while your list price looks great in the board deck.
So before a single letter goes out, I change the plan. Pay on margin dollars, or at minimum on price realization against target. Make the increase the salesperson’s raise: if the program adds four points of price, the rep who holds it should make meaningfully more money than last year. Now the sales force is the program’s enforcement arm instead of its underground resistance. I have never seen a price program hold with revenue-based comp underneath it. Not once, on any continent.
Scripts for the Five Conversations
Customers respond to a price increase in five ways, and only five. I script every one before launch, and we rehearse them out loud — actual role-play, actual objections, no reading off the page. The five:
- The acceptor. Pays without comment. Sixty to seventy percent of accounts. The script is a thank-you and silence. Do not negotiate against yourself by over-explaining.
- The venter. Complains loudly, pays anyway. The script is empathy without concession: acknowledge, explain the cost reality once, hold the number.
- The negotiator. Wants something back. The script trades value, never price: longer commitment, bigger volumes, better payment terms in exchange for phasing. The rate stands.
- The tester. Threatens to leave to see if you flinch. The script is calm and specific: we value the relationship, here is the date the new price takes effect, we would hate to lose you. Most are bluffing, and they are bluffing because it has always worked.
- The leaver. Actually goes. The script is a graceful exit and a follow-up call in six months — a surprising number come back, at the new price, once they experience the competitor who was so eager to win them.
The scripts matter because the failure point of every price program is a single unprepared human on a phone call at 4:45 on a Friday. Preparation is cheaper than the concession.
The Customer Who Threatens to Leave
A war story. At one company, our second-largest distributor responded to a seven percent increase with a formal letter announcing they would move the entire book of business to a competitor within sixty days. Copy to the board, for effect. The old management team would have folded by lunch — I know, because they had folded twice before, and those folds were in the file.
We held. Politely, respectfully, with a personal visit from me — but we held. Here is what the threat conveniently omitted: switching meant requalifying hundreds of SKUs, retraining their branch network, and explaining to their customers why lead times just doubled. Their cost of leaving us dwarfed the cost of the increase. Sixty days later they signed at the full new price, and the relationship today is better than it was, because they respect us more. The customer who threatens to leave almost never leaves. The threat is a negotiating tactic with a decades-long track record of working on scared suppliers. Stop being one.
Holding the Gain
Getting the increase is the visible half of the program. Keeping it is the half that pays. Price leaks through exceptions, and exceptions multiply in the dark. So I put governance around price the same way I put governance around capital.
Three mechanisms. First, an exception approval ladder: any discount below floor price requires sign-off one level up, and anything past a defined depth comes to me personally. When a discount needs the CEO’s signature, it is remarkable how few situations truly require one. Second, a monthly price realization report — one page, realized price versus target by segment, reviewed in the operating meeting with the same seriousness as safety and cash. What the CEO inspects, the organization respects. Third, an annual rhythm: increases go out the same month every year, tied to the cost cycle, so pricing becomes weather rather than news. Companies that price annually stop having pricing crises. They just have Octobers.
Two Years of EBITDA in Ninety Days
Last story. A CEO I worked with ran a niche manufacturer doing roughly $120 million with about $13 million of EBITDA. Growth plans everywhere: a bolt-on acquisition teed up, a capacity expansion on the drawing board, a new product line in development. Years of work, tens of millions of capital, all of it uncertain. Meanwhile the company had not taken a general price increase in five years, and its corridor on core products was 24 points wide.
We ran the program exactly as laid out above — quartiles, worst first, comp fixed, scripts rehearsed, governance installed. Ninety days from kickoff, the letters were out and holding. Realized price came in a little over four percent net of attrition, on a business where material was already covered by surcharges. The EBITDA impact was about $4.5 million — call it 35 percent growth — which was more than his acquisition and his expansion combined were projected to deliver over the following two years. Two years of planned EBITDA growth, found in ninety days, for the cost of some analysis and a few uncomfortable phone calls. He said the hardest part was realizing he could have done it three years earlier. It always is.
The Cheapest EBITDA You Will Ever Find
Every other lever on the EBITDA bridge costs something real. Mix takes quarters to shift. Share costs sales capacity and marketing money. M&A costs capital and integration pain. Cost takes restructuring charges and morale. Price costs a decision and some nerve, and it starts paying in weeks. That is why it is the first lever I pull in every company I touch, and the one I hold with the most discipline afterward.
If you suspect your corridor is wide and your prices are stale, do not start with a committee. Start with the math. The 80/20 Institute publishes a free Price Increase Calculator that lets you run your own numbers — your revenue, your margin, your assumed attrition — and see what courage is actually worth in your business. Most CEOs who run it stop being afraid of the increase and start being afraid of another year without one. That is the correct fear. It is the one supported by arithmetic.
Frequently Asked Questions
How Much Attrition Should I Expect From a B2B Price Increase?
Far less than you fear. In well-run programs across industrial and distribution businesses, I typically see low single-digit revenue attrition on a mid single-digit increase — and the accounts that leave are concentrated in the least profitable quartile. Model it conservatively: even losing 5 percent of revenue on a 10 percent increase leaves a typical 10 percent margin business roughly 70 percent better off on EBITDA.
Should I Raise Prices on My Biggest Customers Too?
Yes, but differently. Large strategic accounts get a tailored increase, delivered in person, often phased, sometimes traded for longer commitments or better terms. What they do not get is a permanent exemption — an exempted top account becomes the excuse that unravels the whole program. Protect the relationship, not the old price.
What if a Competitor Undercuts Us After We Raise Prices?
In rational B2B markets it rarely happens, because your competitors face the same cost inflation and the same margin pressure you do. Most follow an increase rather than fight it. When undercutting does occur, it is almost always on low-margin, high-hassle business you are better off losing. Watch for it, respond surgically on accounts that matter, and do not let one anecdote reprice the whole book.
How Do I Get My Sales Team to Support a Price Increase?
Change their math before you change the price. Pay on margin dollars or price realization instead of pure revenue, so the increase raises their income rather than just their difficulty. Then arm them: scripts for the five customer conversations, rehearsed out loud, plus early wins from the first wave of low-risk accounts. Salespeople follow evidence and incentives, in that order.
How Often Should a Company Take Price Increases?
Annually, on a fixed calendar, tied to your cost cycle. An annual rhythm turns pricing from a dramatic event into routine weather — customers budget for it, salespeople expect it, and you never again accumulate five years of stale prices that require one terrifying catch-up move. The companies in the most pricing pain are almost always the ones that waited the longest.
