Pricing for profit: how to know whether you are charging enough
Busy and underpriced is the most common problem we see. Here is how to check your price against your own numbers.
Underpricing rarely looks like a crisis. It looks like a full calendar, a tired owner and a bank balance that never grows. The fix starts with knowing what a job actually costs you.
Know your true cost first For each service or product, add up: - Direct labor, including payroll taxes and the time nobody bills for: quoting, revisions, travel, follow-up. - Materials, subcontractors and job-specific software or fees. - Payment processing and platform fees, which quietly take a percentage.
That gives you cost per job. Revenue minus these costs is your gross margin — the money left to cover overhead and profit.
Then cover overhead and profit on purpose Divide your monthly fixed overhead by the number of jobs you realistically deliver in a month. That is the overhead each job must carry. Add the profit you want as a target, not as whatever remains. Price = direct cost + overhead share + target profit.
Signals your price is too low - Gross margin drifting down while revenue climbs. - Almost nobody negotiates and almost nobody says no. - You cannot pay yourself a market wage for the work you do. - Growth makes cash worse instead of better. - Rework, rush jobs and scope creep are absorbed rather than charged.
Raising prices without losing the business - Raise in steps, starting with new customers and new quotes. - Change what is included rather than only the number: tiers, minimums, clearer scope, paid revisions. - Give existing clients notice and a reason tied to value, not to your costs. - Expect to lose some price-driven customers. Losing the least profitable ones is often the point.
Test it on real jobs Take three recent jobs and calculate their actual margin, including the unbilled hours. Owners are often surprised that the biggest job was the least profitable. That single exercise usually changes pricing faster than any formula.
Job-level margin only works if your bookkeeping is set up to capture costs by service. That is part of what we do in our monthly plans, and Strategic and Accelerator clients get strategy sessions where pricing and tax impact are reviewed together. Book a free bookkeeping assessment to see where you stand.
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Our monthly plans include the deadlines, filings and reminders in this article.