Four tests, none of which require knowing what competitors charge. If you win nearly every job you quote, your price is below what the market will bear. If your net margin after burdened labor and allocated overhead is thin or negative, the price is below cost regardless of what the market bears. If a modest rate rise would still leave you ahead after losing the customers most likely to leave, you are underpriced. And if price complaints come mostly from customers you would not miss, that is a signal about fit rather than about price. Run all four before changing anything.
What this actually feels like
You are busy. You are always busy. The work keeps coming and the schedule is full and somehow the year ends without much to show for it, which does not feel like it should be possible.
Being busy at the wrong price feels identical to being successful, right up until you look at what is left.
What it costs to do by hand
The arithmetic is not the hard part — a couple of hours with your job margins and win rate gives you the answer.
The hard part is that the answer usually implies raising prices on people you have relationships with, and that is a conversation most owners will postpone indefinitely in favour of finding a cheaper supplier instead.
Calculating true job margin
Pricing decisions rest on knowing real cost. Burdened labor and allocated overhead are where the number you are pricing against goes wrong.
Read the guide →Input, skill, output
- QuickBooks — Revenue and cost by product line.
- PayPal — Payment fees netted against each sale.
- Scenario inputs — The price changes you want tested.
- Map margins — Profit per product line.
- Model prices — Three scenarios run side by side.
- Sense-check — Against sector benchmarks.
- Margin map — Where you make money and where you do not.
- Three scenarios — Modelled, with the volume you could lose.
- Benchmark read — How your pricing sits in context.
Who this is for
- You win most of what you quote.
- Your prices have moved less than your costs over the last two years.
- You have never worked out the margin on your most common job type.
If none of those describe you, this is probably not your first priority — and the rest of the library may point somewhere more useful.
Common questions
Is a high win rate really a bad sign?
Not bad, but informative. Winning nearly everything usually means you are the cheapest option rather than the best-fit one, and there is room to test.
How much can I raise prices?
Model it rather than guess. Work out how much volume you could lose at a given rise and still be ahead — the answer is often a surprisingly large share, because the lost work is usually the least profitable.
What if I lose customers?
Some loss is the point. If a 6% rise loses you the 15% of customers who were least profitable, you have more capacity and more money. The risk is losing the wrong ones, which is why margin by customer comes first.
Should I raise prices for existing customers?
Eventually, with notice, and in writing. Holding legacy pricing indefinitely means your longest relationships subsidize your newest, which is exactly backwards.
What if my competitors are cheaper?
Then compete on something else or accept lower volume at a viable price. Matching a competitor who is underpricing simply means both of you go out of business, in an order neither of you chose.
See it on your own books, once
The First Close is one real month of your books, closed properly and configured to your chart of accounts, delivered inside two weeks. Full reconciliation against every processor, every exception flagged with the transaction behind it, and the narrative written. $497, refundable if the packet is not delivered, and it credits in full toward the first month if you continue.
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