In this article · 11 sections
- Step 1: Know your true costs
- Step 2: Check the market
- Step 3: Price by value where you can
- Step 4: Build packages
- Step 5: Decide on extras and policies
- Step 6: Show prices wisely
- Raising prices without losing good customers
- Discounts: use carefully
- A quick pricing worksheet
- Frequently Asked Questions
- Should I be the cheapest in my area?
- How do I know if my prices are too low?
- Should prices differ for businesses and individuals?
- How often should I review prices?
- Need help presenting your pricing?
Many small business owners set prices by looking at what competitors charge and going slightly lower. It feels safe — but it often leads to long hours, thin margins and no money to invest in better staff, equipment or marketing. Good pricing starts from your costs, considers the market, and reflects the value you deliver.
Step 1: Know your true costs
List everything it costs to deliver one job or one unit of service:
- Direct costs: materials, fuel, parts, subcontractors, payment gateway fees.
- Labour: staff time, including your own time valued at a fair rate.
- Overheads: rent, electricity, software, phone, insurance, vehicle EMIs and maintenance, accounting — divided across the jobs you do in a month.
- Marketing: your cost to acquire a customer. See measuring marketing ROI.
- Taxes and an allowance for non-payment, rework and idle time.
Your price must cover all of this and leave profit. Many businesses discover that some services they sell are actually loss-making once overheads are included.
Step 2: Check the market
Understand what customers pay for similar services in your area — but compare like with like. A cheaper competitor may use lower-quality materials, give no warranty, or not pay GST. Your job is to know where you sit: budget, mid-range or premium.
Step 3: Price by value where you can
Value-based pricing asks: what is this worth to the customer?
| Service | Value to the customer |
|---|---|
| Airport taxi at 3 am | Not missing an international flight |
| Business website | New enquiries every month for years |
| Same-day AC repair in June | A cool home for the family today |
| Wedding photography | Memories that can't be recreated |
When value is high and your reliability is proven, you can charge above cost-plus pricing. Explain that value clearly on your website and quotations. See writing winning quotations.
Step 4: Build packages
Packages make buying easier and protect margins:
- Basic: essentials for price-sensitive customers.
- Standard (recommended): what most customers need, positioned as the best value.
- Premium: extras, faster service, more support.
Most customers choose the middle option when it's clearly presented. Packages also let you adjust scope rather than discount when customers negotiate.
Step 5: Decide on extras and policies
- What costs extra: night charges, urgent delivery, additional revisions, travel outside area.
- Minimum charges for small jobs.
- Advance payments and cancellation fees.
Write these down and apply them consistently.
Step 6: Show prices wisely
Decide whether to publish prices, starting prices or ranges. See should you show prices on your website.
Raising prices without losing good customers
- Review prices at least yearly as costs rise.
- Give existing customers notice.
- Explain improvements — better equipment, faster response, warranty.
- Consider keeping old rates for a short period for loyal customers.
- Accept that a few very price-sensitive customers may leave — often they were the least profitable.
Discounts: use carefully
Frequent discounts train customers to wait for offers and can damage your positioning. Prefer value-adds (free check-up, extra service) or seasonal offers with clear end dates over permanent price cuts.
A quick pricing worksheet
For each service, write down: direct costs, labour hours × hourly cost, share of monthly overheads, marketing cost per customer and target profit. Add them up to get your minimum price. Compare with your current price and with the market. Services priced below the minimum need a price increase, a smaller scope, or a decision to stop offering them.
Frequently Asked Questions
Should I be the cheapest in my area?
Rarely a good strategy for small businesses. Compete on reliability, quality and service instead.
How do I know if my prices are too low?
If you're always busy but not profitable, or customers never question your price, you may be underpriced.
Should prices differ for businesses and individuals?
Often yes — business clients may need invoices, credit terms or larger volumes. Keep the logic consistent.
How often should I review prices?
At least once a year, and whenever major costs change.
Need help presenting your pricing?
Joboo Web designs pricing pages and packages that explain value clearly. See website design or contact us.
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