How do I know if I am charging enough?

Work out the true cost of delivering the work — direct costs, a fair share of overheads, and your own time valued at what you would have to pay someone to replace you — then look at the margin left at your current price. If it is thin, or you are visibly busy and no better off, you are underpriced. The blunter test: if you won every quote you sent last quarter, your prices are too low. A healthy conversion rate involves losing some work on price, and an owner who never loses any is subsidising their customers.

Will raising prices lose me customers?

Some, occasionally — but far fewer than most owners fear, and the ones who leave are usually the least profitable and the most demanding. The arithmetic is the reassuring part: at a 40% gross margin, a 10% price rise means you could lose a fifth of your volume and still be ahead on gross profit. Test it on new customers first, which is a low-risk way to find out what the market will actually bear before you touch existing ones. Most owners discover the resistance was in their own head rather than in the market.

Should I compete on price?

Rarely, and only if you are genuinely the low-cost operator with a structural cost advantage — better buying, higher volume, lower overheads. If you are not, competing on price is a race you will lose to whoever has more capital or fewer scruples, and it trains your customers to buy on price, which makes every subsequent conversation harder. Competing on outcome, speed, reliability or specialism is more profitable and more defensible. It is also more work, which is precisely why fewer competitors do it.

How often should I review prices?

At least annually, and immediately whenever a material input cost changes. Prices that stand still while wages, materials, insurance and software all rise mean a margin that shrinks quietly every year until the business is working harder for less without any single decision having caused it. Put a date in the calendar rather than waiting for a trigger, because the trigger tends to be a cash crisis, which is the worst possible moment to be having a difficult conversation with customers.

How do I actually tell customers?

Briefly, in writing, with a date and no apology. Give reasonable notice, state the new price and when it takes effect, and do not offer a lengthy justification — detailed explanations invite negotiation and imply the increase is up for discussion. If you want to soften it, honour existing quotes and give longstanding customers a slightly later effective date. What does not work is a sheepish phone call, or a price rise announced but then quietly not applied to anyone who pushes back, which teaches everyone what to do next time.

What if my costs went up but my customers cannot pay more?

Then the answer is not a price rise, and forcing one just loses the work. The realistic levers are changing what is included — smaller scope at the old price is an increase in disguise and is often more palatable — reducing the cost to serve, or accepting that a segment of your market is no longer profitable and letting it go. That last option is legitimate and under-used. A customer you serve at a loss is not a customer, and keeping them because the revenue looks reassuring is how businesses stay busy and broke.

How to price for profit | Buzz Accounting

Pricing is one of the most powerful levers you have — a small change flows almost straight to the bottom line — and one of the most under-thought. Plenty of businesses set a price once, based on what a competitor charges or what "feels about right", and never revisit it. Here's a more deliberate way to think about it.

Start by knowing your true costs

You can't price for profit if you don't know what something actually costs you to deliver. That means more than the obvious direct costs — it includes a fair share of your overheads and, crucially, the cost of your time. A lot of owners discover that their busiest, "cheapest" service is barely profitable once their own hours are counted properly.

Understand your margins

Gross margin — what's left after the direct cost of delivering the work — is the number that funds everything else: your overheads, your salary, your growth. A price that looks healthy can hide a thin margin once delivery costs are in. Knowing your margin per product, service or customer type tells you where the real money is made, and where you're busy but not better off.

Price on value, not just cost

Cost tells you the floor; it doesn't tell you the right price. What a customer will happily pay depends on the value and outcome you deliver, not on your internal costs. Businesses that only ever add a markup to cost tend to leave money on the table — especially service businesses, where the value delivered can far exceed the hours spent.

A worked example: what a 10% discount actually costs

The figures here are illustrative, but the arithmetic is the point and it holds at any size. A business sells 2,500 units a year at £100. Each one costs £60 to deliver, so the gross margin is £40 a unit, or 40%. That is £250,000 of turnover, £150,000 of direct costs and £100,000 of gross profit. Overheads run at £80,000, which leaves £20,000 of net profit.

Now discount by 10%. The price drops to £90, delivery still costs £60, and the margin falls from £40 to £30 a unit — a quarter of the gross profit on every sale, given away for a tenth off the price. Sell the same 2,500 units and gross profit falls to £75,000, which after £80,000 of overheads is a £5,000 loss. To get back to the same gross profit at the new price you would need to sell 3,334 units: a third more work, a third more delivery cost, and not a penny more profit at the end of it.

Run it the other way. Put the price up 10% to £110 and the margin goes from £40 to £50 a unit. At the same volume, gross profit rises to £125,000 and net profit goes from £20,000 to £45,000 — more than doubled, on a change most customers would not query. Better still, you could lose a fifth of your volume, dropping to 2,000 units, and still make the same £100,000 of gross profit with 500 fewer jobs to deliver.

The rule underneath all of that is one line of arithmetic you can do this week. Divide your current gross profit by the margin per unit at the price you are considering, and you have the volume that price needs. Do it before you agree the next discount, because a 10% discount is never a 10% decision. The same sum is worth running on your own time as a cost: if you take £75,000 a year out of the business and work 2,300 hours to do it, your hour is worth roughly £33, and any job that quietly absorbs ten unbilled hours of it has £330 of cost in it that never appeared on a quote.

The common mistakes

Competing on price. Unless you're genuinely the low-cost operator, racing to be cheapest is a race you don't want to win.
Never increasing prices. Costs rise every year; if your prices don't, your margin quietly erodes.
Discounting by default. A 10% discount can wipe out a large chunk of profit — often you'd need a big jump in volume just to stand still.
One price for everyone. Different customers value different things; tiered or packaged pricing usually beats a single flat rate.

Test, review, repeat

Pricing isn't a one-off decision. Review it regularly against your costs and margins, and don't be afraid to test a higher price on new customers before rolling it out. The fear of losing customers is almost always bigger than the reality.

Where we come in

Pricing decisions are exactly the kind of thing our advisory work and business coaching get into — using your actual numbers to find where you're underpriced, model the impact of a change, and give you the confidence to make it. If you want to do some of the thinking first, our value gap worksheet works through where profit is leaking, and what a new hire actually costs covers the other half of the margin question. If pricing is something you've never properly sat down with, it's often the single highest-return conversation we have.

How to price for profit (without just guessing)