How to price your services (without guessing)

Ask a room of service business owners how they set their prices and you’ll hear a lot of “I looked at what others charge and went a bit lower.” It’s understandable, and it’s the most expensive habit in small business. Competitors’ prices tell you nothing about your costs, your efficiency or what your work is worth.

Here’s a method that starts with your numbers and ends with a price you can defend.

What’s the lowest price you can charge?

Start with a floor — the price below which every job loses money.

1. Add up annual costs. Rent, insurance, vehicles, software, phone, accounting, marketing, equipment, staff wages and super.
2. Add your own wage and super. Pay yourself what you’d have to pay someone to do your job. Leaving it out is how businesses look profitable while owners work for less than their staff.
3. Add a profit margin. Profit is what funds growth, buffers and the next piece of equipment — not a luxury.
4. Work out realistic billable hours. Take the hours you’re paid for in a year and subtract leave, public holidays, admin, quoting, travel and quiet weeks.

Illustrative item	Amount
Business running costs	$68,000
Owner wage + super	$105,000
Target profit	$25,000
Total to recover	$198,000
Paid hours available (46 weeks × 38 hours)	1,748
Realistic billable share (65%)	1,136 hours
Floor hourly rate	about $174 + GST

The numbers are illustrative. The step people skip is the billable share. Assume you’ll bill every hour you work and your rate comes out far too low — then the admin, quoting and travel you didn’t count come straight out of your own pocket.

Which pricing model suits your business?

Once you know the floor, choose how to present your price.

Hourly or daily rates. Simple and fair when the scope is unclear. The downside: the faster and better you get, the less you earn per job, and customers watch the clock.

Fixed project pricing. You quote a set price for a defined scope. Customers love certainty, and you keep the reward for being efficient. The risk is scope creep — so define inclusions and exclusions carefully (see our guide to quoting a job).

Packages and tiers. Good, better, best options. Many customers pick the middle, and the top tier anchors the others.

Value-based pricing. You price on the outcome — the extra revenue, the avoided fine, the saved downtime. business.gov.au lists value-based pricing among common strategies alongside cost-plus and premium pricing. It works best where results are measurable and you’re not a commodity.

How do you move from floor to real price?

The floor is the minimum, not the answer. To position above it, consider:

• What alternatives cost the customer — doing it themselves, hiring someone, or living with the problem.
• Your specialisation — a narrow specialist can charge more than a generalist.
• Speed and reliability — turning up on time and finishing when promised is worth paying for.
• Demand — if you’re booked out for weeks, your price is probably too low.

Check your result against your margins. The ATO’s small business benchmarks show typical cost ratios by industry, which can reveal whether your pricing leaves you unusually thin.

Planning a price change that needs a little working capital behind it — new equipment, a first hire? Check what you might qualify for; it doesn’t touch your credit file.

How often should you review your prices?

At least once a year, and any time a major cost moves — a new award rate, rent increase, insurance renewal or supplier price rise. Small, regular increases are easier for customers to accept than large, overdue ones. Our guide to raising your prices covers how to communicate them, and the price-rise calculator shows how many customers you could lose and still come out ahead.

How should you price when you’re just starting out?

New businesses often price low to win their first customers. It’s understandable, but it sets an anchor that’s hard to move. A better approach:

• Start at your floor price or above, calculated as shown earlier. Discount for a specific reason — a portfolio piece, a strategic first client — and label it as a one-off.
• Quote packages rather than hours where you can, so customers compare outcomes rather than rates.
• Plan your first price review for six months in, once you know your real billable hours and costs.
• Watch your win rate. Winning every quote in your first months is a sign to lift prices, not celebrate.

Our feature on first-year money mistakes covers under-pricing alongside the other traps that catch new owners, and the break-even guide shows how many billable hours your price needs to cover.

Pricing properly is the first funding decision

Every business eventually needs capital for something — a vehicle, a hire, a bigger premises. Well-priced work makes that capital easier to get and easier to repay, because lenders look for margins that comfortably cover commitments.

When that moment comes, we can help. Our team considers trading businesses for unsecured facilities typically from $5,000 to $500,000 and property-secured loans from $20,000 to $5,000,000. There’s no credit check to start the conversation, we don’t sell your enquiry on to other lenders, and a real person who understands service businesses will call. Fill in the form accurately — turnover, amount, purpose — and we’ll aim to get it right on the first call.

See if you qualify →