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 Mornington Peninsula 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.