The 11% Pricing Stat Is From 1992. Your Number Is 1 ÷ Your Margin.
（正文为英文，方便在 Google 上被本地客户搜到。）
Raising prices by 1% lifts profit by roughly 1 divided by your operating margin, not by a fixed 10% or 11%. At a 20% margin that is 5%. At a 5% margin it is 20%. The famous "1% price, 11% profit" figure is the 1992 average of 2,463 large public companies, published in Harvard Business Review, and it assumes you lose no customers at all. The number that actually decides a price rise is a second one: how many jobs you can lose and still earn the same, which is your raise divided by (your margin plus your raise).
That second number is also the one this reader cares about most. If a raise lets you do fewer jobs for the same money, the difference comes back to you as hours. This post traces the famous stat to its source, shows where a popular guide gets the customer math wrong, and ends with a 30-minute check you run on your own last three months.
Where does the "1% price increase, 11% profit" figure come from?
It comes from an article by two McKinsey consultants, Michael Marn and Robert Rosiello, titled "Managing Price, Gaining Profit," published in the September to October 1992 issue of Harvard Business Review. The article is still listed there, and a reprint is posted by UNC Charlotte. Its Exhibit 1 compares four profit levers. A 1% improvement in price creates an 11.1% improvement in operating profit; variable cost 7.8%; volume 3.3%; fixed cost 2.3%. The footnote reads: "Based on average economics of 2,463 companies in Compustat aggregate."
The article states the condition plainly: a 1% improvement in price, "assuming no loss of volume, increases operating profit by 11.1%." Compustat is a database of publicly traded companies. So the figure describes a large public company with an average margin, in 1992, that lost no sales after the raise.
Eleven years later McKinsey published "The power of pricing" (February 1, 2003), with Marn as lead author again. On "the average income statement of an S&P 1500 company," a 1% price rise "would generate an 8 percent increase in operating profits." Same firm, same lead author, same method, a different number. Nothing about pricing changed between the two. The average margin of the companies in the sample did.
On page one of Google for this question we read the 16 guides that loaded (2 of 18 did not), on October 1, 2026. None of them names this source. One, Patrick Accounting, prints the claim as "raising your prices by just 1% can increase your profit by as much as 10%" and works an example at a 10% profit margin. Its arithmetic is right for that business. It is not a rule for yours.
Why is your number 1 divided by your margin?
If nothing else changes, a price rise adds the same dollars to revenue and to profit, because no extra work or material went into it. Say a shop takes in $1,000,000 a year and keeps $100,000 as operating profit, a 10% margin. A 1% raise adds $10,000 to revenue and the same $10,000 to profit. $10,000 on top of $100,000 is a 10% lift. Change the margin and the lift changes with it.
Work it backwards and the two McKinsey figures (1992 and 2003) make sense. An 11.1% lift means the 1992 sample averaged about a 9% operating margin (1 divided by 11.1). An 8% lift means the 2003 sample averaged about 12.5%. Your own multiplier is 1 divided by your operating margin. Margin here means profit before owner draws and taxes, as a share of revenue, from your last full year.
One honest limit: this only holds when you lose nothing. Real price rises lose some jobs. So the more useful question is how many.
How many customers can you lose after a price increase?
Use your contribution margin here, not your operating margin. Contribution margin is what is left of an average job's price after the costs that come only with that job: materials, the hourly wages paid for that job, fuel, card fees, commission. Rent, insurance and your office do not count, because they stay the same whether you do 80 jobs or 100.
The jobs you can lose before your total contribution drops is your raise divided by (your contribution margin plus your raise). With a 40% contribution margin and a 7% raise, that is 7 divided by 47, or 14.9%. You could do 15 fewer jobs in every 100 and earn the same contribution as before.
This is where the most specific guide on page one goes wrong. CrazyEgg's guide says that at "a 60 percent gross margin" with a 10% raise, "you can lose no more than 9 percent of your customers before the prices negatively affect your profits." Run it. On a $100 job with $40 of job costs, you keep $60. Raise the price to $110 and you keep $70. Losing 9% of 100 jobs leaves 91 jobs at $70, which is $6,370 against $6,000 before. Profit went up, not to break-even. The real profit break-even is 10 divided by 70, or 14.3%. The 9% figure is 10 divided by 110, which is the point where revenue stays flat. Revenue is not what you take home.
The two are easy to confuse, and the error always points the same way: it tells an owner a raise is riskier than it is.
| Your contribution margin | 5% raise | 7% raise | 10% raise |
|---|---|---|---|
| 30% | 14.3% | 18.9% | 25.0% |
| 40% | 11.1% | 14.9% | 20.0% |
| 50% | 9.1% | 12.3% | 16.7% |
| 60% | 7.7% | 10.4% | 14.3% |
Share of jobs you can lose and keep the same total contribution. Each cell is raise divided by (margin plus raise). Computed for this post; check any cell yourself.
The table reads the opposite way from instinct. The thinner your margin, the more jobs you can afford to lose, because each job you keep gains more from the raise relative to what it earned before.
What does a price increase do to your hours?
Most guides stop at profit. For an owner who already makes enough and has no evenings left, the more useful reading of the table is in jobs. Take the 40% shop with a 7% raise. If it loses 10 of every 100 jobs instead of the 14.9 it could afford, contribution goes from $40 a job on 100 jobs ($4,000) to $47 a job on 90 jobs ($4,230). That is about 6% more money from 10% fewer jobs.
Ten fewer jobs is ten fewer site visits, ten fewer quotes to chase and ten fewer invoices. If you personally touch each job for 30 minutes, that is five hours a month back. Count your own version: jobs per month, times the share you might lose, times the time you personally spend on each job.
If your techs are on salary, the job costs above shrink and your contribution margin rises, so the table gives a smaller cushion. The freed time does not show up as savings on paper. It shows up as crew capacity you can sell at the new price. Our post on how much of your week is admin work shows how to count the owner hours that hang off each job.
What should you check before you raise prices?
This takes about 30 minutes with your books open.
- Pull the last three full months. Write down total revenue and the number of jobs. Divide to get your average job price.
- Add up the costs that came only with those jobs: materials, hourly labor on the jobs, fuel, card fees, commission. Divide by revenue and subtract from 1. That is your contribution margin. A shop where these costs are 60% of revenue has a 40% margin.
- Pick a raise and compute your cushion: raise divided by (margin plus raise). Write it as a number of jobs per month, not a percentage.
- Write down your current quote win rate: quotes accepted divided by quotes sent, same three months. You need it in step 6.
- Raise the price on new quotes only for 30 days. Existing customers and signed work stay where they are.
- Compare the new win rate to the old one. If the drop in won jobs is smaller than your cushion from step 3, the raise paid. If it is bigger, you have learned that from one month of quotes, not from a year of lost customers.
We looked for published data on what quote win rate means a service business is underpriced, and found none from a source we could check. Any rule of thumb you see quoted for that should be treated as an opinion.
If you would rather have someone else do steps 1 to 3 against your actual job records, our free Work Audit includes it, along with where the owner hours in each job go.
Does this work for a small service business, not just big companies?
The arithmetic does. It is the same division at any size. What the 1992 and 2003 studies cannot tell you is how your customers will react, because their samples were large public companies and they held sales volume fixed by assumption. That is why step 5 tests on new quotes for a month instead of predicting.
The same arithmetic also runs backwards. The 1992 article notes that a 1% price decrease for an average company "would destroy 11.1%" of its operating profit dollars, and the 2003 article calculates that the average S&P 1500 company would need 18.7% more volume just to make up for a 5% price cut. A discount to win one job costs more than it looks for the same reason a raise earns more than it looks.