Undercharging vs overcharging in your small business

Setting the right price for your trade services can make or break your business. Charge too little, and you risk burning out while struggling to cover expenses. Charge too much, and you might scare off potential clients. So, how do you find the right balance?

The dangers of undercharging

Many tradies, especially when starting out, undercharge for their work. This might seem like a good strategy to attract customers, but it comes with serious downsides:

1. Low profit margins – You’re working hard but barely making a profit.

2. Unsustainable workload – More jobs don’t always mean more income if they’re priced too low.

3. Clients who expect cheap work – Attracting bargain-hunters leads to price wars, not quality clients.

4. Struggles with cash flow – If your pricing doesn’t factor in taxes, materials, and overhead, you’ll always be playing catch-up.

The risks of overcharging

On the flip side, overcharging without offering enough value can drive potential customers away. The biggest mistakes tradies make when pricing too high:

1. No justification for pricing – If customers don’t see the value, they’ll look elsewhere.

2. Losing competitive edge – Competitors with better pricing strategies will win the job.

3. Longer gaps between jobs – Fewer bookings can lead to unpredictable cash flow.

So, how do you price your services correctly?

1. Know your costs – Factor in materials, time, overhead expenses, taxes, and profit margins.

2. Research the market – Compare pricing with competitors in your area (but don’t just match their rates).

3. Charge for value, not just time – If you provide expertise, premium service, or convenience, price accordingly.

4. Test and adjust – If you're fully booked, your prices might be too low. If you’re struggling for work, reassess how you present your pricing.

5. Communicate value clearly – Clients pay for quality, reliability, and experience—not just the lowest price.

   
   

By finding the sweet spot in pricing, you’ll attract the right customers, maintain a steady income, and build a profitable business.

Pricing shouldn't be a guessing game

Charge too little, and you’ll be overworked and underpaid. Charge too much without the right positioning, and you’ll scare off clients. The key? A pricing strategy that ensures profitability while attracting quality customers.

Inside our Small Business Foundations Course, we teach tradies how to price their services for sustainable profit - so you're never left wondering if you're charging too much or too little.