Putting Together A Pricing Strategy

For many small businesses, pricing is often a reactive process. Watching what competitors do and slashing prices to win business might seem smart in the short term, but it’s a race to the bottom that can ultimately destroy your profitability.

The truth is, pricing needs to be intentional, data-driven, and grounded in the realities of your business. Undercutting competitors may bring in work, but unless your price covers all costs and includes a reasonable profit margin, you're just working harder for less.

Start with Your Costs

Before setting any price, you need to know what it takes to keep the lights on. This means calculating:

• Fixed costs (rent, salaries, insurance, utilities)

• Variable costs (materials, shipping, contractor fees)

• Your own salary

• Equipment costs, including depreciation and loan interest

Don’t forget software subscriptions, marketing spend, and business compliance costs. If it costs you money to stay in business, it should be accounted for in your pricing.

Understand the Market, But Don’t Mimic It

Yes, you should know what your competitors charge, but blindly following their lead is a mistake. You don’t know their cost structure, margins, or what corners they may be cutting. Competitor pricing should be part of your research, not the foundation of your strategy.

Instead, assess:

• What value you bring

• What services are included

• Your positioning in the market

• Your unique selling points

If you’re offering more, charge more, but be ready to back it up with clear messaging and consistent delivery.

Choose a Pricing Strategy That Works for You

Here are several smart pricing strategies to consider:

• Premium pricing – Charge more because you offer more. Works if you can communicate and deliver real value.

• Value-based pricing – Price based on what the customer believes your product or service is worth.

• Volume discounts – Encourage larger purchases with tiered pricing or bulk discounts.

• Loss leaders – Offer a product or service at a loss to attract new customers who’ll buy more later.

• Two-part pricing – Combine a base fee with add-ons (e.g., setup fee + monthly charge).

• Peak pricing – Charge more for urgent or last-minute work.

Negotiation: Plan for Flexibility

If you’re quoting for projects or large jobs, build a margin into your initial price so you have room to negotiate. Also set a price floor, the minimum price you’ll accept. Never go below this.

Being prepared gives you confidence and helps avoid panic discounting when a client pushes back.

Raising Your Prices Without Losing Customers

Price rises are inevitable, but they don’t have to drive customers away. Follow these principles:

• Do it gradually, not all at once

• Communicate early and explain why

• Improve your offering at the same time—whether through better service, faster turnaround or enhanced value

• Review pricing annually instead of waiting years

The Bottom Line: Don’t Compete on Price Alone

If you're always the cheapest, you’ll always be replaceable. A sustainable business is built on value, not volume.

Invest time in understanding your costs, defining your value proposition, and exploring your pricing options. If you're unsure where to begin, speak with a business adviser or accountant who can help you develop a tailored strategy that makes your business more profitable, and less dependent on gut instinct.

Need help with pricing, cashflow, or business strategy? Contact Dolman Bateman today for professional guidance and proven results. Let's help you charge what you're worth.

Meeting with Gavin Bateman

30

Book Now

Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.