One of the biggest challenges for many small business owners is knowing how to set prices. You want to be fair to your customers while also making sure your business is profitable and sustainable. How do you determine what to charge for your services? Do you base your pricing on time, materials, competition, experience, or your desired profit margin?What advice would you give to a new business owner who is trying to find the right balance between being affordable and making sure they are not undercharging themselves?

Pricing comes down to knowing your exact cost to operate—not guessing or copying the guy down the street.Here’s the fast breakdown:Know Your Break-Even: Factor in labor, fuel, insurance, software, and equipment wear. If your total cost to run for an hour is $60, charging $65 isn't "fair"—it's bankrupting you.Price the Job, Not the Hour: Hourly rates penalize you for getting faster. Flat-rate or package pricing protects your margins and gives clients clarity up front.Target a 40–50% Close Rate: If you’re landing 80%+ of your quotes, your prices are too low.Cheap prices attract high-maintenance clients. Price for the business you want to build—with proper margins for maintenance, upgrades, and growth—not just today’s gas money.

Finding the Right Price: How Do You Charge Fairly While Still Making a Profit? As A Small Business

5 Replies

AnthonySalazar
Verified Community Coach
1 month ago
Probably the biggest paradigm shift a small business owner can make is changing from time or labor based pricing to value based pricing. Selling the dream outcome and desire your ideal customer wants, not just based on an arbitrary formula of COGs + margin.
- mims01
  Builder 1
  1 month ago
  Great point. A lot of entrepreneurs get stuck trying to justify their price by the amount of time something takes, when the real question should be: “What problem am I solving and what is that solution worth?” Value creates a stronger business than just trading hours for dollars.
travisshepherd
Verified Community Coach
1 month ago
Pricing comes down to knowing your exact cost to operate—not guessing or copying the guy down the street.
Here’s the fast breakdown:
Know Your Break-Even: Factor in labor, fuel, insurance, software, and equipment wear. If your total cost to run for an hour is $60, charging $65 isn't "fair"—it's bankrupting you.
Price the Job, Not the Hour: Hourly rates penalize you for getting faster. Flat-rate or package pricing protects your margins and gives clients clarity up front.
Target a 40–50% Close Rate: If you’re landing 80%+ of your quotes, your prices are too low.
Cheap prices attract high-maintenance clients. Price for the business you want to build—with proper margins for maintenance, upgrades, and growth—not just today’s gas money.
- mims01
  Builder 1
  1 month ago
  This is something I’m learning as I build my service business. It’s easy to price based on what feels fair, but you have to factor in your expenses, your expertise, and the value you bring to the customer. A sustainable business has to make a profit to keep serving people.
TurfT
Verified Community Coach
1 month ago
One framework that changed how I think about pricing: when you're new and have no clients, do the work cheap or even free to build experience and reputation. As you get busier, start charging more. Fill your schedule, then raise prices again. Keep raising until a meaningful number of people say no — but you still have enough work. That's your real market price.
What's "fair" isn't what your competitor charges or what feels comfortable. Fair is what's profitable for you. You have to be fair to yourself first or you won't be in business long enough to serve anyone.
I went through this myself. Started low to build a client base, kept raising prices as demand grew, and I'm still raising them. The clients who leave when prices go up were never the clients I wanted to keep anyway. At this point my focus is finding high-value clients who will pay top dollar for the best results. That's where the progression leads if you stick with it.

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Finding the Right Price: How Do You Charge Fairly While Still Making a Profit? As A Small Business