Pricing mistakes that cost your business more than you think
Pricing can make or break a business. Yet for many tradies and small business owners, setting the right price is more guesswork than strategy. Whether you’re undercharging, reacting to competitors, or failing to review prices regularly, common pricing mistakes can quietly eat into your profits and slow down growth.
Underpricing to win customers
It’s tempting to keep prices low to attract new work, but this approach often backfires. Underpricing not only squeezes your margins, it can also send the wrong message about the quality of your service.
Actions:
Review your costs and make sure your pricing includes a healthy margin.
Compare your prices to competitors, but don’t base pricing solely on them.
Identify what makes your trade services valuable — don’t sell yourself short.
Communicate your value clearly in quotes and conversations.
Test price increases on a small group of customers to gauge reaction.
Take one of your regular services, work out your margin, then model what happens if you raise your price by 5–10%. You may find you don’t need as many jobs to come out ahead.
Adjust for rising costs
Inflation, supplier price hikes, and rising wages can quietly erode your margins if you don’t keep pace. Regular reviews and adjustments mean your trade business remains profitable over time.
Actions:
Set a regular schedule (e.g. every 6 or 12 months) to review pricing.
Monitor supplier and operational costs monthly.
Introduce price changes gradually, with clear communication to customers.
Bundle increases with added value, like improved service or warranties.
Benchmark against other tradies in your industry to stay competitive.
Compare your top 5 costs from last year to now. If they’ve gone up but your pricing hasn’t, it’s time for a review.
Understanding profitability by service
Not every service contributes the same to your bottom line. Without clarity on margins, you risk pouring energy into low-profit jobs while missing chances to grow high-margin ones.
Actions:
Break down your services by gross margin.
Identify high-volume but low-margin work.
Use reports to see which jobs bring in the most profit.
Reprice or rethink services that consistently underperform.
Promote higher-margin services in your marketing.
Run a simple report showing revenue and gross profit by service for the past 3 months. Use the results to guide smarter quoting.
Overcomplicating your pricing model
Complicated or unclear pricing can turn customers away. If they don’t quickly understand what they’ll pay and why it’s worth it, they may look elsewhere.
Actions:
Simplify your pricing and make it easy to understand.
Avoid hidden fees or vague terms.
Try tiered pricing or packages so customers can self-select.
Ask for feedback on quotes — see if customers found them clear.
Keep pricing consistent across jobs and platforms.
Ask a mate to review one of your quotes. If they can’t immediately explain your pricing back to you, it may be time to simplify.
Raising prices
Fear of losing customers often stops tradies from increasing prices, even when costs rise or services improve. But avoiding price changes can harm your long-term sustainability.
Actions:
Clearly explain why prices are increasing, e.g. higher material costs or added value.
Position price changes as part of growth and quality, not just extra cost.
Show how your service has improved over time.
Test increases on a smaller group first.
Track feedback and customer retention afterwards.
Choose one service and test a small price increase with new customers or a select group. Monitor the impact carefully.
Final thoughts
Every dollar lost to poor pricing is one you’ll have to work twice as hard to earn back. By reviewing your pricing strategy regularly, keeping an eye on rising costs, and aligning your prices with the value you provide, you’ll protect your margins and strengthen your business.
For tradies, pricing isn’t just about covering your costs — it’s about building a business that’s sustainable for the long haul. If you’d like practical advice on reviewing your pricing or understanding your margins, our Wellington accountants and business advisors can help. Let’s make sure your hard work pays off.
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