How to Set Your Service Business Prices Without Guessing
How to Set Your Service Business Prices Without Guessing
Most tradies pick their prices the same way: "What does everyone else charge?"
That's not pricing. That's copying. And it usually means you charge too little, work too hard, and wonder where the profit went at the end of the month.
Good pricing starts with your own numbers, not your competitor's website. Here's how to work it out step by step.
What You Need Before You Start
Grab these three numbers before you do anything else:
1. Your monthly costs.
Rego, fuel, insurance, tools, phone, software, accountant fees. Everything you pay whether you work or not. These are your fixed overheads.
2. Your hourly goal.
What do you want to earn per hour after costs? Not revenue. Actual take-home pay. Be honest with yourself here.
3. Your billable hours.
How many hours a week do you actually spend on paid jobs? Not driving, not quoting, not doing admin, not buying parts. Just billable work.
Most tradies overestimate their billable hours. If you work 50 hours a week but only 25 are paid work, your rate needs to cover all 50 hours. This is where most pricing goes wrong.
Step 1: Calculate Your Break-Even Rate
Take your monthly costs. Divide by your billable hours per month.
Example:
- Ute repayments: $800
- Fuel: $600
- Insurance: $300
- Tools and parts: $500
- Phone and software: $200
- Accountant: $200
- Miscellaneous: $400
- Total: $3,000/month
If you bill 100 hours a month: $3,000 divided by 100 = $30/hour just to break even.
That's before you pay yourself a cent. This number is your floor. You should never charge below it.
Step 2: Add Your Target Profit
Now add what you want to earn per hour on top of your break-even rate.
$30 break-even + $60 profit target = $90/hour.
If that feels high, check two things:
- Are your costs accurate? Most tradies undercount their overheads. Add up every receipt for a month and see.
- Are your billable hours realistic? If you counted 30 hours but really only bill 20, your rate needs to go up.
The Fair Work Ombudsman has tools to help you understand minimum rates and entitlements if you have staff. Even if you're solo, it's a useful benchmark for what labour is worth in your industry.
Step 3: Build Job-Based Pricing
Hourly rates are a starting point. But most customers prefer a fixed quote. They want to know the total before they say yes.
Convert your hourly rate into job prices:
Standard service
1.5 hours labour ($135) + $60 call-out + $80 parts = $275 total
Brake replacement
2 hours labour ($180) + $60 call-out + $150 parts = $390 total
Diagnostic check
1 hour labour ($90) + $60 call-out + no parts = $150 total
Call-out fee: $50-$80 is standard for mobile services in Australia. This covers your travel time and fuel. Don't skip it. It's not a penalty. It's a cost of doing business.
Parts margin: 15-30% on top of your cost is normal. You're sourcing, carrying, and guaranteeing the parts. That has value.
Now you have a quote that covers your time, your costs, and your profit. No guessing.
How Do You Know if Your Prices Are Right?
Track your close rate. That's the percentage of quotes that turn into booked jobs.
90%+ means you're too cheap. Raise your prices.
70-90% means you're in a good spot.
50-70% is the healthy range for most trades.
Below 50% means you're either too expensive for your market, or your quoting process needs work.
If you're winning every quote, you're leaving money on the table. The sweet spot for most service businesses is 50-70%.
Track your quotes and your close rate over time. Your Light Leads CRM can do this for you. Log each quote, mark whether you won or lost it, and see your close rate at a glance.
Step 4: Review Every 6 Months
Prices aren't set and forget. Review them twice a year and adjust for:
- Rising costs. Fuel, insurance, and parts all go up. Your prices should too.
- Demand. If you're booked out 3 weeks in advance, you can charge more. If you have gaps, consider targeted offers rather than dropping your rate.
- Experience. As you get faster and better, your per-job profit goes up. But also consider whether your hourly rate should reflect your growing expertise.
Common Mistakes to Avoid
- Matching your cheapest competitor. They might be losing money and not know it. Don't follow them down.
- Forgetting GST. Your price to the customer needs to include GST if you're registered. That's 10% on top. The Australian Taxation Office requires GST registration once you hit $75,000 turnover.
- Quoting different prices for the same job. Inconsistent pricing makes you look unprofessional. Use a rate card so every quote is based on the same formula.
- Discounting to win work. Dropping your price to win a job trains customers to expect a discount. It's better to add value (faster turnaround, warranty, pickup/drop-off) than to cut your rate.
Is Pricing This Way Worth It?
Yes. When you price from your real numbers, you stop working for free. You can say no to bad jobs. You can take a week off without worrying about cash flow. And you stop resenting the work.
Want help tracking your quotes and close rates? Book a free call with our team.
