Pricing for Profit: The Art and Science of Setting Prices That Don’t Leave Money on the Table

Running a service business takes energy, focus, and a lot of heart. Whether you’re a consultant, a tradie, a health and wellness practitioner, or running a professional services firm, you know what it feels like to be busy but not always profitable. You put in the hours, deliver quality work, and keep clients happy, but when you check your bank account at the end of the month, the numbers don’t always match the effort you’re putting in. There are so many pitfalls to pricing as a service business and we often forget just how much admin time our business has that we dont account for properly.

This is one of the most common frustrations we see in service businesses. The truth is that pricing is not just about covering costs or matching what competitors charge. It’s about positioning, confidence, and strategy. It’s both art and science, and when you get it right, it transforms your business. Codie Sanchez made a fascinating comment on a recent Diary of a CEO Episode ‘pricing is a conversation of interest only to successful entrepreneurs”.

In this guide, we’ll explore how service businesses can set prices that reflect their value, protect profit margins, and create long-term sustainability.

Why Pricing is Different for Service Businesses

Pricing products and pricing services are two very different worlds. When you sell a product, you have a clear cost of goods sold (COGS). You know what you pay your supplier, you add your markup, and you arrive at a selling price.

Service businesses are different. You’re not just selling time. You’re selling expertise, relationships, outcomes, and often years of training or experience. This makes pricing less straightforward and more emotional.

Some of the most common challenges service business owners face include:

Charging by the hour without considering hidden costs like admin, subscriptions, or travel.
Setting prices based on fear of losing clients rather than value delivered.
Confusing “busyness” with profitability.

It’s possible to be flat out with work and still not make money. That’s why getting pricing right is one of the most powerful levers you can pull to improve your bottom line.

The Science: Pricing Foundations You Can’t Ignore

The “science” of pricing is all about numbers. You need to know your costs, your margins, and your benchmarks before you can make strategic decisions.

Know Your True Costs

Many service business owners underestimate their costs. They think about wages or the hours they personally put in, but forget about everything else that goes into delivering a service.

True costs include:

Direct labour (your time or your team’s time)
Overheads (rent, insurance, subscriptions, software, professional memberships)
Admin and support costs (bookkeeping, payroll, reception, scheduling)
Equipment and tools
Training and professional development
Marketing and sales costs

Even “free extras” like after-hours calls, emails, or travel to client sites are costs. If you’re not building them into your pricing, you’re cutting into your profit.

Understand Your Profit Margin

Revenue and profit are not the same thing. Revenue is the money coming in. Profit is what’s left after every expense is paid.

A healthy service business should aim for a consistent net profit margin after paying yourself and your team. Too many business owners set their prices just high enough to cover expenses, without considering what’s needed for growth, reinvestment, and peace of mind.

Ask yourself: “Am I just covering costs, or am I building profit into every job or service I deliver?”

Benchmark Against the Market

It’s smart to understand what others in your industry are charging, but don’t fall into the trap of copying blindly. Benchmarks are useful as a guide, not a rule.

Your prices should reflect:

Your experience and qualifications.
The quality of service you deliver.
The niche you serve.
The demand for your expertise.

Positioning yourself as a low-cost option rarely leads to long-term success. Competing on value and outcomes is far more sustainable. If you engage in low pricing remember there is always someone out there willing to do it cheaper, a race to the bottom is not what you want to engage in.

The Art: Positioning, Perception, and Value

The “art” of pricing is about psychology, communication, and confidence. How you present your prices can change how clients perceive your service. One of our favourite analogies is think about asking your client for a $5 note in exchange for a $20 bill of your own, ie the price you ask is only a fraction of the value that they will receive.

Price Signals Quality

Think about your own behaviour as a consumer. If something is priced too low, you wonder about its quality. The same applies to services. Cheap often signals “risky” or “inexperienced.”

Higher pricing, when backed by excellent service and outcomes, positions you as a trusted, premium provider. Clients who value quality will happily pay more if they feel confident in the results you’ll deliver.

Communicate Your Value

Clients don’t buy hours. They buy outcomes.

Instead of framing your service as “10 hours of consulting,” frame it as “a tailored strategy that will help you grow revenue and reduce costs.” Instead of “weekly sessions,” explain the transformation your clients will experience by working with you.

When you shift the conversation from time to value, clients are less focused on the cost per hour and more focused on the result.

Tailor Packages and Options

One of the best ways to capture more value is by offering pricing options. A simple good-better-best model allows clients to choose the package that suits them.

For example:

Basic: Covers essentials with limited inclusions.
Standard: Adds more value and flexibility.
Premium: Comprehensive support, unlimited access, and strategic extras.

This approach increases average spend, helps clients self-select, and reduces pushback on pricing.

Pricing Mistakes That Leave Money on the Table

Service businesses often make the same mistakes when it comes to pricing. Here are some of the biggest pitfalls:

Undercharging out of fear or lack of confidence. Worrying clients will leave if you raise your rates.
Failing to increase prices regularly. Costs go up every year, but many businesses leave their pricing untouched for too long.
Ignoring scope creep. Adding extra services without charging for them.
Competing only on price. Focusing on being the cheapest instead of the best value.

Each of these mistakes slowly erodes profitability. Over time, they can leave you feeling stuck and overworked.

Practical Steps to Pricing for Profit in Your Service Business

Now let’s turn strategy into action.

Audit Your Current Pricing

Start by reviewing your current pricing structure. Compare your rates to your actual costs and time invested. Are you truly making money on each service? Identify unprofitable offerings and consider whether they should be adjusted or removed.

Test and Review

You don’t need to overhaul everything at once. Start with small price increases and monitor the impact. Many business owners are surprised at how little pushback they receive, especially if they’ve been undercharging for years.

Build in Annual Reviews

Regular price reviews are non-negotiable. Your costs increase every year, and your experience grows too. Communicate price increases with confidence by focusing on the additional value you provide.

For example: “We’ve updated our pricing to reflect rising costs and the continued investment we make in delivering excellent service. We remain committed to providing value and transparency.”

How a CFO Helps Service Businesses Get Pricing Right

Pricing can feel daunting, but you don’t need to figure it out alone. This is where a fractional CFO comes in.

A CFO helps by:

Analysing your costs in detail so you know your true break-even point.
Building profit margins into your pricing model.
Aligning pricing with your long-term goals and cash flow needs.
Reviewing your financial reports to identify areas where pricing is hurting profitability.
Bringing an external perspective so you can make confident decisions without the emotional bias that comes with pricing your own work.

At Bond Financial, we often hear business owners say, “I just don’t know if my prices are right.” With structured support, we help you take the guesswork out of pricing and replace it with clarity and confidence.

Final Thoughts: Confident Pricing = Confident Growth

Pricing for profit is one of the most important skills you can master as a service business owner. It’s not just about covering costs. It’s about building a business that is sustainable, rewarding, and aligned with your goals.

Remember:

Pricing is both art and science.
Your costs and profit margins must be clear.
Your positioning and communication matter.
Mistakes like undercharging and ignoring scope creep cost you in the long run.
A CFO can help you see the big picture and take the emotion out of pricing decisions.

If you’re ready to feel more confident in your pricing and build a service business that doesn’t leave money on the table, book a consultation with Bond Financial today. Together, we’ll help you find the right balance between value, strategy, and profitability.