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8 small business pricing mistakes trapping Aussie tradies & freelancers

Avoid the most common small business pricing mistakes that Aussie tradies and freelancers make. Get practical tips to price for profit and win more work.

Pricing & Profitability
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8 small business pricing mistakes trapping Aussie tradies & freelancers
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Ever finish a big job, look at your bank account, and wonder where all the money went? You're not alone, mate. Getting your pricing right is one of the toughest gigs for any Aussie sole trader, tradie, or freelancer. It often feels like a guessing game, but getting it wrong can slowly and silently drain the life out of your business. The difference between a thriving operation and one that just scrapes by often comes down to a few critical small business pricing mistakes.
This isn't about complex economic theory or scary spreadsheets. It’s about spotting the common, practical traps that keep hard-working people from being truly profitable. You put in the hours, you deliver quality work, but are you actually getting paid what you're worth after all your costs are covered? Many business owners get a shock when they realise their real take-home pay.
In this guide, we’ll break down the most common pricing pitfalls we see every day. We’ll explain each one in plain English, show you what it looks like with real-world examples (from plumbers to personal trainers), and give you straightforward, practical steps to fix it. Let's get started and make sure your hard work actually pays the bills, and then some.

1. Ignoring Your Hidden Business Costs (The Profit Killers)

This is one of the most common and damaging small business pricing mistakes. You're brilliant at quoting for the obvious stuff: your time on the job and the direct materials you use. But what about all the costs buzzing away in the background? These are your 'overheads' or indirect costs, and they are the silent killers of your profit margin.
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Forgetting these costs means that while you think you're making a healthy profit on each job, your business as a whole could be going backwards. It’s like a painter quoting for paint and labour but forgetting to charge for the brushes, drop sheets, van insurance, and accounting software needed to run the business.

Why It Harms Your Business

When you don't account for overheads, you're essentially paying for them out of your own pocket. This leads to a dangerously low effective hourly rate, where the money you take home is far less than you think. You work hard, complete the job, and are left wondering why there’s no cash left in the bank at the end of the month.

Real-World Examples

  • The Freelance Designer: Quotes 900 Adobe subscription, 500 accounting software. A huge chunk of their "profit" is immediately eaten up by these essential tools.
  • The Tradie: A plumber charges for parts and their on-site labour. They fail to build in the costs of their ute registration, public liability insurance, tool maintenance, and marketing flyers. These costs add up to thousands per year, directly eating into their take-home pay.

The Fix: How to Price for Overheads

  1. List Everything: Make a list of every single business expense for the year. This includes rent, insurance, software, phone bills, accounting fees, marketing, and even your own super. Our guide covers many of the hidden costs sole traders forget.
  1. Calculate Your Hourly Overhead: Add up your total annual overheads and divide that figure by the number of billable hours you realistically plan to work in a year. This gives you an 'overhead recovery rate' per hour.
  1. Add It to Every Quote: This hourly overhead figure must be added to your direct labour and material costs for every single quote. It is a non-negotiable part of your pricing.
A helpful tip: The Profit Calculator at profitcalculator.com.au is designed for exactly this. It makes you list all your overheads, from insurance to software, and automatically works out the true cost of doing business so you can price with confidence.

2. Underpricing Out of Fear of Losing Customers

This is a pricing mistake driven by emotion, not numbers. It’s that nagging voice in your head saying, "If I charge what I'm truly worth, no one will hire me." This fear pushes you to set your prices based on anxiety rather than value, often leading you to drastically undercut the market just to win the job.
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This habit is incredibly common, especially for new businesses trying to build a client base. You think a low price is the easiest way to get your foot in the door, but you end up creating a business model that isn't sustainable from day one. It’s a race to the bottom that you can’t win.

Why It Harms Your Business

Consistently underpricing sets a dangerous precedent. You attract clients who are loyal to your cheap price, not your quality work. When you eventually try to raise your rates to a sustainable level, these clients often disappear. This cycle traps you in a high-stress, low-profit business where you are overworked and underpaid, often for less-than-ideal customers.

Real-World Examples

  • The New Personal Trainer: A recently certified PT charges just 70-$90. They become fully booked but are exhausted and can't cover their own living costs, insurance, and professional development.
  • The Freelance Copywriter: Worried about competing with overseas writers on freelancer platforms, they quote 80-$120. They attract clients with endless revisions and unrealistic expectations, leading to burnout.

The Fix: How to Price with Confidence

  1. Research, Don't Guess: Stop guessing what you think people will pay. Research what your direct competitors with similar experience are charging. Talk to mentors to understand the standard rates in your field.
  1. Focus on Value, Not Price: Shift your sales pitch from "I'm the cheapest" to "This is the result you get when you work with me." Highlight your expertise, reliability, and the quality of your outcomes.
  1. Find Your Floor: Calculate the absolute minimum you need to charge to cover all your costs (including your own wage) and make a small profit. Never quote below this number.
  1. Increase Prices Gradually: If you're currently undercharging, plan small, regular price increases of 5-10% for new clients. This feels less scary than one massive price hike.
A helpful tip: A tool like the Profit Calculator removes emotion from the equation. It makes you enter your desired salary and all your overheads, showing you the cold, hard numbers required to run a profitable business. It calculates your minimum billable rate based on facts, not fear, giving you the confidence to quote what you're actually worth.

3. Using One-Size-Fits-All Pricing

This is a classic small business pricing mistake where you offer a single price for a service to every single customer, no matter who they are. You might think this is fair and simple, but you're leaving a huge amount of money on the table. It’s like a personal trainer charging the same flat monthly fee to someone who comes once a week and a dedicated athlete who trains five times a week.
A one-size-fits-all approach fails to recognise that different customers have different needs and, more importantly, a different willingness to pay. By not segmenting your market, you fail to capture maximum revenue from your high-value customers while potentially pricing out more budget-conscious ones.

Why It Harms Your Business

When you charge a single price, it's almost guaranteed to be too low for your best customers and too high for others. You miss the opportunity to earn more from clients who see immense value in your premium services, and you lose potential clients who only need a basic version of what you offer. This lack of flexibility directly caps your growth.

Real-World Examples

  • The Web Designer: Charges a flat 8,000 for a more robust solution. The designer loses both.
  • The Cleaner: Offers a standard three-bedroom house clean for $180. They miss out on upselling to clients who would pay extra for oven cleaning or window washing. They also might be too expensive for a single person in a small apartment who just needs a quick tidy-up.

The Fix: How to Price for Different Customers

  1. Identify Your Customer Types: Look at your customers. Can you group them by their needs or budget? Common groups are "budget-focused," "standard," and "premium/all-inclusive."
  1. Create Tiered Packages: Develop different service packages (e.g., Bronze, Silver, Gold) with clear differences in features. The Bronze package covers the basics, while the Gold package includes all the bells and whistles.
  1. Offer Add-Ons: Keep your base price competitive but offer optional extras. This lets customers build their own package and lets you capture more revenue from those willing to pay for more value.
  1. Test and Refine: Don't be afraid to try different pricing structures. Pay attention to which packages are most popular and adjust your offerings based on real-world feedback.
A helpful tip: A profit calculator can help you model these tiers. You can create quotes for your "Bronze," "Silver," and "Gold" packages, inputting the different labour times and costs for each. This lets you see the profit margin and effective hourly rate for each option, helping you build packages that are both attractive to customers and profitable for you.

4. Not Thinking About How Much a Customer Costs to Get

This is a more advanced small business pricing mistake, but one that can quietly hold you back. You spend money on marketing and time on sales calls to win a new customer, but have you ever worked out exactly how much that customer costs you to get? And more importantly, is your pricing high enough to cover that cost and still make a profit over the time they remain a customer?
This is all about your Customer Acquisition Cost (CAC). Ignoring it means you could be winning jobs that actually lose you money in the long run. It's like a cafe spending 5 coffee and never comes back.

Why It Harms Your Business

When your pricing doesn't account for CAC, you don't have a sustainable way to grow. You might feel busy because new clients are coming in, but if it costs you 400, you have a major problem. This leads to a constant, stressful cycle of chasing new work without ever building a truly profitable foundation.

Real-World Examples

  • The Personal Trainer: Spends 60 per week program. If the client stays for an average of 10 weeks, they bring in $600. The ratio is 2:1, which is risky and leaves very little room for profit.
  • The Web Agency: Spends 150 per month website maintenance plan. If the average client stays for 12 months, they only bring in 200 before even starting the work.

The Fix: How to Price for Sustainable Growth

  1. Calculate Your CAC: Add up all your sales and marketing costs for a month and divide it by the number of new customers you got in that month. That's your CAC.
  1. Estimate Customer Value: Figure out the average revenue a customer brings in during their entire relationship with your business. For project-based work, estimate how many repeat jobs they might have.
  1. Aim for a 3:1 Ratio: A healthy business generally gets at least three times more value from a customer than it cost to acquire them.
  1. Adjust Your Price: If your ratio is too low, you either need to lower your marketing spend or, more likely, increase your prices to create a sustainable business.
A helpful tip: While a profit calculator focuses on job-by-job profitability, getting these numbers right is the first step. For a deeper dive, it's often wise to speak with a qualified business advisor who can help connect your pricing to your growth plans.

5. Pricing Based on Time, Not the Value You Deliver

Many service-based businesses fall into the trap of billing just for their time and materials. While this is simple, it's a critical small business pricing mistake because it completely ignores the most important factor: the value your work creates for the client. Your five hours of work might save them $50,000, but an hourly rate only captures your effort, not their massive gain.
This mistake leaves a huge amount of money on the table. When you price based on inputs (your time), you're selling a commodity. When you price based on the outcome (their result), you are selling a solution, which is infinitely more valuable.

Why It Harms Your Business

Pricing by the hour puts a hard ceiling on your earning potential; there are only so many hours in a day. It also creates a weird situation where you get paid more if you're slow, and the client wants the job done quickly. This model penalises efficiency and fails to reward the experience that lets you solve big problems in a fraction of the time a junior would take.

Real-World Examples

  • The Accountant: An accountant charges their standard 50,000 in tax. The accountant bills $800 for work that was worth 62 times that amount to the client.
  • The Marketing Consultant: A freelancer is paid a 500,000 in new revenue for the client. The consultant's fee is a tiny fraction of the immense value they delivered.

The Fix: How to Price for Value

  1. Ask About the Outcome: Before quoting, ask questions to understand the financial impact of your work. Ask, "What is solving this problem worth to your business?" or "What would achieving this result mean for your revenue?"
  1. Sell the Result, Not the Hours: Stop selling your time. Don't say "10 hours of web development"; say "A new online store that will increase your sales by an estimated $100,000 a year."
  1. Use Case Studies: Document the financial results you’ve achieved for past clients. Use this proof to justify a higher, value-based price. A 200,000 return for a similar business.
A helpful tip: Use a tool like the Profit Calculator to work out the absolute minimum you must charge to be profitable. This number becomes your floor, giving you the confidence to then price upwards based on the value you deliver, ensuring you never accept a value-based project that is actually unprofitable.

6. Changing Prices Too Often or Inconsistently

One of the most unsettling small business pricing mistakes is constantly changing your rates. This happens when you adjust prices on the fly, based on a competitor's new flyer, a slow Tuesday, or just how you feel that day. This erratic approach confuses your customers and makes your brand seem unstable.
It's like a PT who charges one client 85 because they feel swamped, then drops it to $60 the next week to get new business. Nobody knows what the "real" price is, and it makes the service feel unprofessional.

Why It Harms Your Business

Inconsistent pricing erodes trust. Customers who paid a higher price feel ripped off, while new customers are hesitant to commit, fearing the price will jump tomorrow. It also makes it impossible for you to know what pricing strategy actually works, as you never give one approach enough time to gather data. Your decisions become based on panic, not profit.

Real-World Examples

  • The Freelance Writer: Feeling desperate, they quote a new client a low rate of 1,200. The two clients talk, and the freelancer's reputation is damaged.
  • The Cafe Owner: They adjust the price of their coffee and toastie deal almost weekly based on a rival cafe's specials. Regular customers get frustrated and start going elsewhere.

The Fix: How to Price with Stability

  1. Set a Review Schedule: Instead of reacting daily, schedule a formal pricing review every six or twelve months. This forces you to look at your numbers strategically.
  1. Communicate Changes Clearly: When you do need to increase prices, give your customers plenty of notice. Explain the "why" behind it, like rising material costs or service improvements.
  1. Look After Loyal Clients: Consider keeping long-term clients on their existing rate for a set period to reward their loyalty.
  1. Document Your Pricing: Keep a record of why you set your prices at their current level. This prevents emotional, short-term decisions.
A helpful tip: Using a calculator gives you a price based on data, not daily emotions. By inputting your true costs and desired profit, it generates a stable price point. You can model the impact of a price change before you commit, allowing you to make strategic decisions, not reactive ones.

7. Not Testing Your Prices

This is a classic "set it and forget it" mistake that costs businesses a fortune. You picked a price when you started, maybe based on a competitor or a gut feeling, and you've stuck with it ever since. But have you ever wondered if charging 5 less, might actually make you more money overall? This is where price testing comes in, and it's one of the most overlooked small business pricing mistakes.
Failing to test your pricing is like a ship captain setting a course and never looking at the map again. You might be sailing, but you have no idea if you're on the most profitable route. Small, data-driven adjustments can often lead to big increases in revenue without needing a single new customer.

Why It Harms Your Business

Without testing, you're operating on assumptions, not data. You could be leaving a huge amount of money on the table. A slightly higher price might be accepted by 95% of your customers, dramatically boosting your profit. Alternatively, a slightly lower price might triple your conversion rate, leading to much higher overall revenue. You'll simply never know unless you test.

Real-World Examples

  • The Personal Trainer: Offers a 10-session pack for 799 to new clients for a month and see if sign-ups drop. They might find the conversion rate is identical, earning them an extra $49 per package for free.
  • The Web Designer: Always quotes 5,500 and a "basic" version for $4,500. This tests different value perceptions and can capture clients at different budget levels.

The Fix: How to Test Your Prices

  1. Change One Thing at a Time: Don't change your price and your service offering at the same time. To get clean data, test only the price.
  1. Start Small: Test small changes first, like 5-10%. It’s less risky and can give you valuable insights.
  1. Test on a Small Group: If possible, offer a new price only to a small group of new customers first. This minimises the risk if the test doesn't go well.
  1. Measure the Right Thing: Don't just look at whether people accepted the price. Measure the impact on your total revenue and profit.
  1. Vary Your Offers: Test different packages or tiers to understand what value customers are willing to pay for.
A helpful tip: A profit calculator lets you model different pricing scenarios before you take them to market. You can create a quote at your current price, then duplicate it and adjust the price up or down. The tool will instantly show you how a 10% price increase affects your profit per job and your effective hourly rate. It’s a great first step before you upgrade your pricing strategy with live testing.

8. Failing to Account for ALL Your Business Costs

This is one of the sneakiest small business pricing mistakes because it feels like you're doing things right. You’ve tallied up the materials for the job and your time on site, so your price must be covering your costs, right? Not quite. This approach only looks at direct costs and completely ignores the indirect costs, also known as business overheads, that keep your business running.
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Indirect costs are all the essential expenses not tied to a single job. Think rent, insurance, accounting software, your mobile phone bill, and marketing. Forgetting them means your prices might cover the job itself, but they don't contribute a single dollar towards keeping the business lights on.

Why It Harms Your Business

When you fail to build overheads into your pricing, every "profit" you make is an illusion. That money is already spoken for by your rent, your insurance provider, and the ATO. This creates a constant cash flow crisis, forcing you to use money from a new job to pay for the running costs you should have covered with the last one. It’s an exhausting and unsustainable cycle.

Real-World Examples

  • The Catering Business: A caterer quotes a wedding based only on the cost of food and staff wages. They forget to factor in the commercial kitchen rent, equipment depreciation, and public liability insurance. Their price looks competitive, but they are actually subsidising the event with their business's core funds.
  • The Freelance Consultant: A consultant sets their day rate based on what competitors charge. They don't account for their own super, professional indemnity insurance, or accounting fees. As a result, their take-home pay is far lower than their day rate suggests.

The Fix: How to Price for Overheads

  1. Know Your Costs: Go through your last 12 months of bank statements. Create two lists: direct costs (materials for a specific job) and indirect costs (rent, software, insurance, phone, your own salary).
  1. Calculate Your Overhead Rate: Add up your total annual indirect costs. Then, divide this by the total number of billable hours you plan to work in a year. This gives you an hourly overhead figure you must recover.
  1. Build It Into Your Base Rate: Your final hourly rate must be your desired wage plus this hourly overhead figure. This ensures every billable hour contributes to both paying you and keeping the business running.
A helpful tip: This is where a simple tool makes all the difference. Profit Calculator provides specific fields for all your overheads. It does the maths for you, calculating exactly how much you need to add to each job's price to ensure these indirect costs are covered. This removes the guesswork and makes sure you can account for all your business costs and protect your bottom line.

From Pricing Mistakes to Profit Confidence

We’ve just walked through some of the most common yet damaging small business pricing mistakes that can trip up even the most skilled tradespeople and freelancers in Australia. From forgetting about those sneaky overheads to pricing based on fear, it's easy to see how good intentions can lead to poor profits.
Seeing these errors laid out isn't about making you feel bad. It's about showing you that you're not alone and that there is a clear path forward. Every successful business owner, from a sparky in Sydney to a graphic designer in Melbourne, has made some of these missteps. The difference is they learned from them, adjusted their course, and built stronger businesses because of it.

Your Key Takeaways: From Theory to Action

If you take anything away from this article, let it be these three things. Think of this as your new pricing mantra:
  • Know Your Numbers, Cold: Your pricing cannot be based on a gut feeling or what "the other guy" charges. You must have a rock-solid understanding of your direct costs, hidden overheads, and the personal income you need. Without this foundation, you are simply guessing.
  • Value Over Hours: Your clients aren't just paying for your time; they are paying for a result, a solution, and peace of mind. Shifting your mindset from "what's my time worth?" to "what's this outcome worth to my client?" is a game-changer.
  • Confidence Comes from Clarity: The fear of quoting too high disappears when you know your quote is fair, accurate, and profitable. When you can see the exact breakdown of costs and your real hourly rate for a job, you can present your price with unshakeable confidence.

The Path to Profitable Pricing Starts Now

Moving from guesswork and fear to clarity and confidence starts with one simple action: getting familiar with your numbers. When you truly understand your break-even point and what you actually need to earn, pricing is no longer a dark art. It becomes a straightforward calculation.
You stop apologising for your prices. You stop accepting jobs that you know, deep down, will barely cover costs. You start quoting with authority and building a business that doesn't just survive, but actively thrives on healthy, consistent profit. This isn't just about making more money; it's about reducing stress and building a business that truly serves you.
Ready to stop guessing and finally know what you're really earning on every single job? The Profit Calculator is a simple, no-nonsense tool built for Aussie sole traders and small businesses to eliminate pricing mistakes for good.
👉 Want to know your real hourly rate? Use the Profit Calculator free at ProfitCalculator.com.au.

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