Pricing for Profit
Why most small businesses price for survival, not for the future they want.
Notes from Randall Harper. Thirty years working alongside owner-operators, executives and boards — companies of all types and sizes — across entertainment & media, hospitality, service based business, lifestyle businesses, financial services, retail and not-for-profit, in Australia, Asia, the United Kingdom and the United States. What follows is the thinking I keep returning to.
The price you set is the wage you accept
Owner-operators undercharge for predictable reasons. They benchmark against what they used to charge as an employee. They compare themselves to competitors who are also undercharging. They quietly assume that being affordable is the same as being competitive. None of these produce a sustainable business. Your price is not a marketing decision; it is the wage you have decided your skill is worth, multiplied by the hours it takes to deliver.
Price from the bottom up
Start with the wage you want to earn, plus the wage of anyone you employ. Add direct costs, overheads, tax, super, and a margin for the risk you are carrying. Divide by realistic billable hours — not theoretical ones. The number that falls out is your minimum viable rate. If it is higher than the market, your problem is not pricing; it is positioning. If it is lower than the market, you have been undercharging and the market is quietly trying to tell you.
The three pricing traps
- Cost-plus thinking without checking what the value is actually worth to the customer.
- Hourly rates that punish you for getting faster at your craft.
- Discounts offered before they were asked for — training every future customer to expect them.
Packages, not piecework
Where possible, sell outcomes, not hours. A package — a fixed scope for a fixed price — protects your margin when you get faster and protects the customer from open-ended bills. It also lets you raise prices on the package without renegotiating every line item. Most owner-operators who shift even partially from hourly to packaged pricing see a meaningful jump in both margin and customer satisfaction.
Raising prices without losing the room
Price rises are easier than owners fear. Give existing customers honest notice, hold the new price firmly with new ones, and watch what actually happens. The customers most likely to leave over a sensible price rise are usually the ones least worth keeping. The ones who stay quietly tell you that you should have raised prices sooner, and the room you create lets you serve them better.
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The contents of this paper are the opinion of Clear Point Advisory only. Readers should rely on their own judgement and obtain professional advice appropriate to their circumstances.