How To Work Out What To Charge

Most small businesses price by taking what it costs them and adding some.

That method produces a number tied to your inefficiency rather than to what the work is worth, and it is why capable operators end up underpaid.

Start with what it is worth to them

Not what it costs you. What changes for the customer.

If a piece of work saves someone three months on a project, or unlocks an approval, or removes a cost they have been carrying, that value is the ceiling. Your price sits somewhere below it and above your cost, and the distance between those two is a decision rather than a calculation.

Businesses that never ask what the outcome is worth are pricing in the dark.

Know your actual cost

This is the floor, and most people have it wrong because they only count the obvious.

Direct cost of delivery, including your own time at a real rate. Overheads allocated properly. Rework, which every business has and nobody prices. The unbillable time: quoting, travel, admin, the calls that go nowhere.

Add all of it and divide by what you actually deliver. The number is usually higher than people expect, which is exactly why so many jobs feel busy and produce nothing.

Understand what the market is doing

Not to match it. To know where you sit.

If you are meaningfully cheaper than everyone else, buyers assume something is missing, and often they are right. If you are more expensive, you need a reason a buyer can repeat, and it has to be specific rather than an assertion about quality.

Being the cheapest is a strategy that works only at volume with a cost advantage nobody else has. Almost no small business has that.

Price for the position you want

Your price is a positioning statement whether you intend it or not.

It sets who enquires, what they expect, and how they treat you. Low prices attract the customers who negotiate hardest and complain most, which is the opposite of what people expect when they cut to win work.

Raising prices changes the customer, and that is usually the point.

The things worth charging for that most people give away

Quoting and scoping time on complex jobs. Rush work and out-of-hours availability. Travel to difficult locations. Additional revisions beyond an agreed number. Anything the client changes after work has started.

None of these need to be aggressive. They need to be written down before the job, so raising them is a reference rather than a confrontation.

Test it on the next quote

The way to find out whether your price is right is to change it and watch.

Raise it on the next few quotes. If your win rate does not move, it was too low, and you have just increased your margin on every job that follows.

If your win rate drops, you have learned where the ceiling is, and you have lost the jobs that were least profitable anyway.

Most businesses that do this discover they were well under the market, because they had been benchmarking against their own costs rather than against value.

Raise on the existing base too

New pricing on new work and old pricing on old work is how businesses end up with their longest customers paying the least.

Give notice, explain what has changed, and hold. Some will leave. In almost every case the revenue from the ones who stay exceeds what left, and the time freed up is worth more again.

The number to actually manage

Not price. Margin per hour of your own delivery capacity.

A high-priced job that consumes three times the effort can be worth less than a smaller one. Track what each type of work actually returns per hour, and price and sell toward the ones that win.