How Do I Price My Services as a Small Business?

Pricing is the most anxiety-producing decision a new business owner makes. Most people underprice because they’re afraid nobody will pay. The result: they work harder than they need to for less money.

Start with your costs. Add up everything that goes into delivering your service: materials, travel time, insurance, tools, software, marketing costs, and your own time. Don’t forget the hidden costs — the time you spend on estimates, phone calls, and follow-ups. If a plumbing job costs you $150 in materials and 4 hours of labor, and you want to make $75/hour, your price is $450 minimum.

Add your margin. A 30-50% markup is standard for most service businesses. That covers the jobs that run over time, the slow months, and the business expenses you forgot to include. If your cost calculation says $450, charge $600-675.

Check the market. Search for what competitors in your area charge. You don’t have to match them, but you shouldn’t be dramatically higher or lower than the market range. Being the cheapest attracts price-sensitive customers who are the hardest to satisfy. Being 10-15% above average with better service is a stronger position than competing on price.

The most important pricing rule: Raise prices every 6-12 months. Your experience increases, your costs increase, and inflation eats your margin if you don’t adjust. A 10% price increase each year is normal and expected. Most customers won’t blink. The ones who leave over $10 are usually not the customers you want.

When to charge more: You have more experience than most competitors, you have reviews that prove results, you offer a guarantee, or you’re consistently booked out. If you’re turning away work, you’re not charging enough.