Why most people underprice, and why it compounds.
The instinct when you are starting out is to come in cheap to win the work. It makes sense on the surface — you have no track record, you do not want to scare people off, and frankly you are not fully confident yet. I get it. I did the same thing with my first services business in the early 2000s.
The problem is that a low rate sets a ceiling that is very hard to raise. Your first ten clients tell their friends what they paid. You build a referral network priced at the bottom. When you try to put rates up six months later, those same clients feel betrayed. You also end up taking on more work than you can handle at low margin, which means you are too busy to find the better-paying clients who would actually move the needle.
It compounds in the other direction too. High prices attract a different kind of client — one who has budgeted properly, who respects your time, and who is less likely to quibble over every invoice line. That is not snobbery, it is just what I have observed across five businesses.
Start with your actual cost, not what feels comfortable.
Before you think about what the market will bear, you need to know your floor. Add up everything: your time (at a realistic number of billable hours per week — not 40, because admin, sales, and travel eat more than you expect), your tools and subscriptions, your insurance, your vehicle or travel costs, your accountant, and a realistic allowance for the weeks when the work is thin.
If you are a sole trader, HMRC's Class 4 National Insurance and your income tax bill need to be in that calculation too. People forget this constantly. A £400-a-day rate sounds reasonable until you remember that roughly a third of it is going to the government one way or another, and you have no employer topping up your pension or covering your sick days.
Once you have a real cost figure, add a minimum margin. For most service businesses I have worked with, anything below 30% net margin is a precarious place to operate. You need margin for the slow months, for unexpected costs, and for the investment in tools or people that will eventually let you grow.
What the market will bear is not the same as what you should charge.
The next step most people skip is testing the top of the market, not the middle. Go and find the most expensive version of what you do in your area. Not to copy it, but to understand what a premium service looks like and what it is positioned around. In East Kent that might mean looking at what a top-tier kitchen fitter in Faversham charges versus a mid-market one in Folkestone, or what a premium copywriter in Canterbury gets per day versus a generalist on Bark.
The gap between the cheapest and the most expensive in almost any service category is larger than people realise. And the most expensive is rarely ten times better at the underlying craft — they are usually better at positioning, communication, and the experience of working with them. That is learnable. It is also where I spend a lot of time in mentoring sessions, because it is the lever that changes a business's trajectory fastest.
The value anchor: price to the outcome, not the input.
Here is the shift that made the biggest difference in my own businesses. When you price by time — £X per hour, £Y per day — you are arguing about inputs. The client is always, in the back of their mind, calculating whether you are worth that hourly rate compared to someone cheaper. You are competing on cost.
When you price by outcome — a website that will be live and generating enquiries in four weeks, a brand identity package including three concepts and final files, an automation that replaces two hours of daily admin — the conversation is different. Now the client is comparing your price to the value of the result. A plumber who quotes "two days' labour" is in a different conversation than one who quotes "your bathroom sorted by Friday, guaranteed."
This is not about being slippery with scope. It is about being clear on what the client is actually buying. Define it precisely, deliver on it, and your price becomes much easier to defend.
How to raise your prices without losing your existing clients.
This is the question I get most often in mentoring. The honest answer is that some of them will leave, and that is usually fine. The clients who leave when you raise prices are typically the ones who take the most time, pay the slowest, and refer the fewest good leads. Losing them creates space.
The practical approach is to grandfather existing clients at their current rate for a defined period — say, three to six months — while quoting all new work at the new rate. Put it in writing. "From September, my standard rate moves to £X. I am holding your rate at £Y until the end of the year as a thank you for ongoing work." Most decent clients will appreciate the transparency. Some will pre-pay or commit to more work at the old rate, which is also fine.
Do not apologise for the increase. An apology signals that you are not confident in it. A brief, matter-of-fact explanation — "my costs have gone up and the rate better reflects the experience I bring" — is all you need. I have seen this done well dozens of times, and the version that works is always the direct one.
The website problem: what showing your prices online actually does.
A lot of Kent service businesses avoid putting prices on their website. The logic is usually "every job is different" or "I don't want to scare people off." I understand the instinct, but I disagree with it in most cases.
Showing a price — even a "starting from" figure — filters your enquiries. The people who contact you already know roughly what they are committing to, which means your sales conversations start in a better place. You spend less time quoting for work you were never going to win. And it signals confidence. A business that names its price is a business that believes in its price.
That said, there are services where bespoke quoting genuinely makes sense — complex builds, long consultancy engagements, anything where scope varies wildly. In those cases, I would at least show a case-study price or a project range ("projects of this kind typically run between £2,000 and £6,000") so the visitor has some orientation before they pick up the phone.
One practical exercise to do this week.
Take your current day rate or project price. Write down the last five jobs you did at that rate. For each one, estimate how many hours you actually put in — including the back-and-forth emails, the revision rounds, the time spent chasing the invoice. Divide the total fee by the total hours. That is your actual effective hourly rate.
For most people doing this exercise for the first time, the number is uncomfortable. That discomfort is useful. It tells you exactly how much padding you need to build in on scope, on admin time, and on your headline rate to make the business financially sustainable rather than just busy.
Once you know your real number, you can make a clear decision: tighten your scope and process so the same rate works better, raise the rate, or both. All three are legitimate. Carrying on without knowing the number is not.
When to bring in outside eyes.
Pricing is one of those things where it is genuinely difficult to see your own situation clearly. You are too close to it. You know what the work costs you in effort, you have a running sense of what your local market charges, and you have an emotional relationship with the number you have been using. All of that makes it hard to think straight.
I have had this conversation with a lot of Kent operators over the years — a builder from Ramsgate who was working sixty-hour weeks at an effective rate of £11 an hour, a virtual assistant from Whitstable who had not raised her prices in three years because she was afraid to, a web designer in Canterbury who was charging half what I would have charged for the same quality of work. In every case, an hour of honest outside perspective shifted something.
That is most of what a mentoring session is, really. Not a formula, but a straight conversation about the numbers and the thinking behind them, from someone who has been on both sides of the pricing table.