You finally have a few clients coming in. Now you are staring at your rates wondering if the number you picked is right, or if you are leaving money on the table every single invoice.
Most new service owners solve this the same way: they look at what everybody else in the area charges and copy it. Match the market, undercut it a little, hope the phone rings. That feels safe. It is one of the fastest ways to erode your margin before your business is even standing on its own feet.
I have spent more than 20 years advising business owners, most of them in construction and the skilled trades, out of Edmonton. The pricing mistake I see at the start is almost always the same. Owners price off the competitor, not off their own cost of doing the work.
Why copying the market quietly kills you
Here is the problem with matching a rate you found online or heard from a friend. You have no idea what is baked into their number.
Maybe they own their trucks outright. Maybe they run lean because they have no overhead yet. Maybe they are underpricing too and slowly going broke, and you just copied a sinking ship.
A price is not a market fact. It is the output of one specific business’s costs, capacity, and margin targets. Borrow the number without the math behind it and you inherit a decision that was never built for you.
When you price by square footage or by matching the going rate, you are also assuming every job costs you the same to deliver. It does not. Access, travel, prep, the mess left behind by the last crew, the client who needs three follow-up visits. Two jobs at the same square footage can have very different real costs.
Why this compounds if you ignore it
Underpricing does not announce itself. There is no alarm. You stay busy, the deposits land, and it looks like things are working.
Underneath, the gap between what you charge and what the work actually costs shows up as an owner living cheque to cheque. Profitable on paper, never sure what is safe to draw out. I have coached that exact situation: a small contracting business that was making money by the accountant’s math and still could not tell you what was safe to pay itself.
The longer a low price runs, the harder it is to move. Your early clients anchor to it. Your reviews anchor to it. Raising rates later means a fight with your own reputation. A pricing mistake made in month two can follow you for years.
The fix: price off your numbers, then position
Stop asking what the market charges. Start with two questions you can actually answer.
1. What does this job cost you to deliver?
Before you set a rate, build the real cost of a typical job:
- Labour, including your own time at a real wage, not zero
- Materials and consumables
- Travel and vehicle cost
- A share of your overhead: insurance, phone, software, marketing
- The jobs you do not get paid for: quotes, callbacks, no-shows
That last one matters. High-security or high-restriction sites are a good example. Extra screening, PPE requirements, equipment inspections, and access delays all eat billable time. If your price does not account for the friction of the actual site, you are working part of that job for free.
2. What margin do you need to survive and grow?
A price that only covers cost is not a price. It is a favour. You need gross margin to run the business and net margin to build anything that lasts.
This is where a cash system earns its keep. The Profit First framework developed by Mike Michalowicz has you carve profit and tax into separate accounts first, so margin stops being an afterthought you hope shows up at year end. I have set this up with owners and watched money actually appear in the profit account inside two quarters, because the system forces the discipline the spreadsheet never did.
Then, and only then, position
Once you know your floor, look at the market. Now the comparison is useful, because you can decide where to sit on purpose. Premium, mid, or volume. That is a strategy. Copying a stranger’s number is not.
An honest caution
Pricing off cost does not mean you can ignore the market entirely. If your true cost sits far above what your area will pay, that tells you something real: your delivery is too expensive, your target client is wrong, or the service itself needs rethinking. Do not solve that by pretending the market does not exist. Solve it by fixing the cost side or moving upmarket to clients who value the work.
Do not chase a benchmark number for your city as if one exists. Rates vary by service type, client, and site. The reliable benchmark is your own cost plus the margin you need.
The people and process piece
Pricing does not sit alone. Who you take on as a client and how you quote them feed straight into your margin. A bad-fit client drains hours no rate recovers. A sloppy quoting process leaves money out or promises work you cannot deliver at that price. Tighten those alongside your numbers.
This is the kind of operational and leadership work I do with home-service and construction owners through the Business Building Program at Workplaces, helping owners move revenue and, more importantly, protect margin so the business can eventually run without them living in it.
Your one next step
Pick your most common job type. Build the full cost of delivering it, line by line, including your own time and a share of overhead. Put your current price beside it and calculate the actual margin.
If that number surprises you, you just found the most expensive assumption in your business. Fix that one first.
Build what compounds.
