Price Check — Are You Charging Enough for Your Services?

The Minimum Viable Rate Formula

Before you think about market rates or what competitors charge, you need to know your floor — the minimum rate at which your business breaks even and pays you a living wage.

The formula is straightforward:

(Annual overhead + owner's wage target + profit target) ÷ billable hours = minimum hourly rate

Let's work through it with real numbers. A service business in Geelong with:

• Annual overhead of $150,000 (rent, insurance, subscriptions, vehicle, admin)
• Owner's wage target of $120,000
• Profit target of $60,000 (retained in the business for growth or distribution)
• Estimated billable hours of 1,200 per year (roughly 23 hours per week — realistic for a working owner after admin, sales, and non-billable time)

$150k + $120k + $60k = $330,000 needed. Divided by 1,200 hours = $275 per hour minimum.

If you're charging $180/hr, you're not just leaving money on the table — you're running at a loss on your own labour.

Why Most Service Businesses Don't Raise Prices Annually

The three reasons service businesses stay underpriced:

1. Fear: "If I raise prices, clients will leave." (They mostly don't — see below.)
2. Inertia: The price was set when the business started and never reviewed. Overhead has increased. Award rates have increased. The price hasn't.
3. Assumption: "My clients can't afford more." This is usually a projection, not a verified fact. Most service businesses have never tested their price ceiling.

The result is a business that gets busier every year while the owner's real income (accounting for inflation and increasing costs) goes backwards.

The Evidence: Clients Rarely Leave Over Reasonable Increases

A 5–10% price increase from a trusted, quality service provider results in very low client attrition. The clients most likely to leave on a price increase are:

• Price-sensitive clients who were already looking for the cheapest option
• Clients who were already marginal — slow to pay, demanding, low-margin work

Losing 3–5% of your client base while increasing revenue by 8% on the remaining 95% is a straightforward win. Most business owners don't see it that way because they focus on the lost relationship rather than the net financial outcome.

How to Do a Competitor Rate Check

Before setting your new rates, understand the market. Three approaches:

• Get three quotes: as a prospective client, approach three comparable businesses in your area and request a quote for a typical piece of work. This is the most accurate data you'll get.
• Industry associations: most Australian trade and professional associations publish suggested rates or hourly rate guidance for members.
• Your own enquiries: when prospects tell you they're "getting a few quotes," ask what they're seeing in the market. People often tell you, especially if you've built rapport.

Signs You're Definitely Undercharging

You don't need a spreadsheet to know you're underpriced. These are the signs:

• You're always busy but never have any money — fully booked, cash-poor
• You can't afford to hire help, even though you desperately need it
• Every quote you send wins — a 100% quote conversion rate is not a triumph, it's a warning sign that you're the cheapest option in the market
• You have no waiting list — there's no friction at all in the buying decision
• You haven't had a pay rise in three years, but award rates and CPI have increased every year

How to Raise Prices Without the Drama

The practical approach:

• New clients get the new rate immediately. No announcement needed — just quote the new rate.
• Existing clients get 60 days' written notice. Keep it brief and professional: "From [date], our rates will be [new rate]. This reflects [insert genuine reason — CPI, award rate increases, material costs]."
• Don't apologise. A professional price adjustment is not a betrayal. Business costs increase every year.
• Handle pushback directly. If a client objects, ask what outcome they're looking for. Sometimes the answer is a reduced scope, not a reduced rate.

Annual Price Review as a Non-Negotiable

Build a price review into your July planning every year. Check against:

• The Fair Work Australia annual wage review (award rate increases take effect 1 July)
• CPI for the prior 12 months
• Your actual overhead — has rent, insurance, or subscription costs increased?
• Your target wage — are you still on track to pay yourself what you planned?

A 3–5% annual increase is barely noticeable to clients but compounds significantly over five years. Missing even two annual reviews means your real income is lower than when you started.