How to price your services
The most common pricing mistake in UK small business is charging too little — quietly, for years. This is a practical, honest guide to setting a price that covers your costs, reflects your value, and leaves room to grow.
Ask a room of small-business owners how they set their prices and most will admit the truth: they looked at a couple of competitors, knocked a bit off to be safe, and have barely touched the number since. It feels prudent. It is usually a mistake — and an expensive one, because a price set too low doesn’t just cost you margin on one job, it caps the value of every job you’ll ever do.
Pricing is a growth lever, not an afterthought. A few percent on your price flows almost entirely to profit — the costs are already paid for. This guide walks through it in four stages: know your true costs, choose a method, position and justify the price, and review and raise it. No theory you can’t use; just what to actually do.
The four stages of getting your price right
Know your true costs
You can’t price a service until you know what it genuinely costs to deliver — and almost everyone underestimates this, because the obvious costs are only part of it. Get the floor wrong and every price above it is built on sand.
- Direct costs — the materials, subcontractors, software seats or travel that a specific job consumes. Easy to spot, easy to bill.
- A fair share of overhead — rent, insurance, accounting, your phone and tools, the time spent quoting and admin. Total it for the year, divide by the hours you can actually sell, and add that to every job.
- Your own time, paid properly — not what’s left over, but a real salary. If you wouldn’t pay an employee what you pay yourself, your price is too low.
Choose a pricing method
There are two honest ways to arrive at a number. Most strong businesses use the first to set a floor and the second to find the ceiling — you need both.
- Cost-plus sets your floor: take what the job costs you, add the margin you need to be sustainable. It guarantees you never lose money — but it ignores what the work is actually worth to the buyer, so on its own it almost always leaves money on the table.
- Value-based sets your ceiling: price on the outcome the customer gets, not the hours you put in. If your work saves a client £20,000 a year, charging £2,000 for it is a bargain to them at any cost to you. This is where real margin lives.
Position & justify the price
The same number feels expensive or fair depending entirely on how it’s presented. You’re not tricking anyone — you’re helping a buyer understand what they’re getting and why it’s worth it.
- Offer tiers — good, better, best. Three options reframe the question from “yes or no” to “which one,” and a well-judged top tier makes the middle one look sensible.
- Bundle rather than itemise. A single price for a clear outcome is easier to say yes to than a line-by-line invoice that invites haggling.
- Show proof and remove risk. Reviews, before/afters, a clear scope and a money-back or fixed-price guarantee all let you charge more, because they take the fear out of the decision.
Review & raise
A price is a decision you should revisit, not a tattoo. Costs rise every year; if your prices don’t, you’re taking a quiet pay cut. The trick is raising them without losing the customers worth keeping.
- Review at least once a year — and whenever your costs jump, your waiting list grows, or you’ve added real skill or results.
- Raise in steps, with notice. A clear, polite heads-up to existing customers — with a reason and a date — lands far better than a silent change on the next invoice.
- Lead with new customers. Quote the new price to everyone fresh first; bring loyal clients up afterwards, perhaps a little more gently. The ones who leave over a fair rise were usually your least profitable anyway.
Work out your price floor
This calculator does the cost-plus sum for you: enter what a job or unit of work costs you to deliver and the profit margin you want to keep, and it gives you the price that achieves it. Remember it’s a floor — the lowest you should sensibly charge — not a ceiling. Value-based pricing can, and often should, go higher.
Cost-plus price calculator
This is a cost-plus floor — the least you should charge to keep a 40% margin. What the work is worth to the customer (value-based pricing) is often higher, so treat this as your starting point, not your final answer.
Cost-plus vs value-based, honestly
These aren’t rival camps you have to pick between — they answer different questions, and you want both answers in front of you before you quote.
Protects you
You add up the cost and stack a margin on top. It’s simple, defensible, and guarantees no job loses money — which is exactly why it’s the right way to find your floor.
Its weakness is that it’s entirely inward-looking. It has no idea whether the customer would happily pay double, so used alone it systematically undercharges your best work.
Grows you
You price on the result — the money the customer makes or saves, the risk or hassle you remove, the time you give back. Two clients can fairly pay very different prices for the same hours.
It takes more nerve and more understanding of the customer, but it’s where margin comes from. The more clearly you can name the outcome you deliver, the more of this you can capture.
In practice: use cost-plus to make sure you’re never working at a loss, then ask the value-based question — “what is this genuinely worth to the person buying it?” — and let the answer pull your price up from the floor toward what the market will happily bear.
Signs you’re undercharging
You win almost every quote
A near-perfect hit rate isn’t a win — it usually means your price is so low it’s a no-brainer. Losing a sensible share on price is healthy.
Busy but not profitable
Fully booked and still scraping by is the classic underpricing trap. You’ve sold your time too cheaply, so more work just means more tired.
Nobody ever flinches
If not a single customer hesitates at your price, you’ve left money on the table. A little resistance means you’ve found the edge of the value.
You haven’t raised prices in years
Costs have risen every year. If your prices haven’t moved, you’ve been quietly giving yourself a pay cut for as long as they’ve stood still.
Common questions
How do I know if I’m charging too little?
Watch the signals: if you win nearly every quote, no customer ever hesitates at the price, and you’re constantly busy yet never comfortably profitable, you’re almost certainly undercharging. The cleanest test is to do the cost-plus sum honestly — including a fair wage for yourself and a share of overhead. If your current price barely clears that floor, you have no margin to absorb a bad month, let alone to grow.
Should I show prices on my website?
Usually yes, at least as a clear “from” figure or a typical range. Hiding price doesn’t make you look premium — it makes cautious buyers assume the worst and leave, and it wastes your time on enquiries that were never going to afford you. The exception is genuinely bespoke work where every job differs wildly; there, a starting-from price plus “every project is quoted individually” still beats total silence. Showing a confident price is itself a signal of value.
How much should my profit margin be?
There’s no universal right answer — it depends on your costs, your market and how specialised your work is — but for most service businesses a healthy target sits somewhere around 40%, with high-volume commodity work running thinner and genuine expertise commanding more. The important thing isn’t hitting a magic number; it’s making sure the margin is large enough to pay you properly, weather quiet periods and reinvest. If your margin only works when every month is busy, it’s too thin.
How do I raise prices without losing customers?
Raise in steps, give existing customers fair notice with a brief reason and a clear start date, and quote the new price to all new enquiries first so the change feels normal by the time it reaches your regulars. Frame it around value — what they get, not just what it costs — and consider bringing your most loyal clients up a little more gently. In practice the customers who walk over a reasonable, well-communicated rise tend to be your least profitable; the ones who value your work stay.
What is value-based pricing?
It means setting your price on the value the work delivers to the customer — the money they make or save, the risk or hassle you remove — rather than on what it costs you to do or how many hours it takes. If a piece of work earns a client £20,000, its worth to them is anchored to that outcome, not to your time. Value-based pricing takes a clearer understanding of your customer and a bit more confidence, but it’s where the strongest margins come from, because it lets your price track the result instead of the clock.
Tell Bea, our AI assistant, what you do and what you currently charge — she’ll help you sense-check your pricing and spot where you might be leaving money on the table, free and in plain English.
