Should I raise my prices in year two?

The direction of pricing error is consistent: most badly chosen prices are set too low, and service businesses typically run somewhere below the value they deliver rather than above it. A price established in month two by somebody nervous about saying a number aloud is not a considered position. It is an artefact of that moment.

Raise it on new customers first, because there is no conversation, no transition, and no relationship at risk. This alone corrects most of the gap within a year as your customer base turns over, and it is the step to take immediately because it costs nothing and can be reversed if the market disagrees.

For existing customers, give notice, phase it if the relationship is ongoing, and state plainly what applies and when. Do not apologise and do not justify it with your own rising costs, which is your problem rather than theirs and invites a negotiation about whether your costs really rose. State the new number, the date, and that you are glad to continue.

Expect to lose a few, and treat that as the mechanism working. The accounts that leave over a modest increase are reliably the ones consuming the most attention for the least return, and the capacity they free is worth more than the revenue they represented.

The test for whether you have gone far enough is uncomfortable and useful: if you have never lost a customer on price, you are probably still under. Some proportion of prospects should decline. If none do, the number sits below the point where anybody has to think about it.

Handle the increase differently for work already quoted or in progress. Anything you have committed to should complete at the agreed price, regardless of when it finishes, because changing a number mid engagement damages more than the difference is worth. The new price applies to what comes next.

Consider whether the increase should be uniform or targeted. Frequently one category of work is considerably more underpriced than the rest, usually the type that expanded in scope over the year without the price moving. Raising that specifically, rather than everything by the same percentage, corrects the actual distortion and is easier to explain.