A Brisbane bookkeeper opens her laptop to quote her first decent client, a hospitality group with three venues. She checks what established firms charge, lands on a number, then knocks 25 per cent off it. Just to be safe. Just until she’s built a name. The client says yes on the spot, and it feels like proof the strategy worked.
Three years later she’s flat out, can’t afford to hire, and every quote conversation starts from that first discounted number. That’s the pattern this post is about, and the myth that sits underneath it.
The myth: you have to be cheap to win work in year one
The myth goes like this: nobody knows you yet, so price is the only lever you have, and once you’ve built a reputation you’ll raise your rates. In our experience the second half almost never happens on schedule. The low price becomes the reputation.
New service businesses in Brisbane repeat this to each other constantly. Trades, consultants, designers, bookkeepers, cleaners. It sounds humble and sensible. It’s neither. It’s a bet that you can change what clients believe you’re worth after you’ve already told them, and clients rarely cooperate.
What actually wins work in year one is being reachable, quoting fast, turning up when you said you would, and explaining clearly what the client gets. Price sits well down that list for most service buyers. Ask anyone who’s tried to get a tradie to return a call in Brisbane lately.
What underpricing actually costs you over three years
Underpricing costs most service businesses far more than the discount itself, because it compounds through every client, every referral and every renewal. The discount you gave one client in month two becomes the anchor for every conversation after it.
Here’s the working with deliberately round, conservative numbers. Say you’re a solo consultant who could reasonably charge $120 an hour but starts at $90 to win work.
- Billable hours per year: 1,000 (modest for a busy solo operator)
- Revenue at $90: $90,000
- Revenue at $120: $120,000
- Gap in year one: $30,000
Same clients. Same hours. Same work delivered. Now run it across three years, because raising prices on existing clients is slow and most owners chicken out of doing it properly. That gap is $90,000 before you account for anything else.
And there is something else. At $90,000 a year you can’t afford a part-time admin or a junior, so you keep doing everything yourself, which caps your billable hours, which caps revenue again. The cheap price didn’t just cost margin. It removed the money you needed to grow.
We see this constantly in Profit Reset engagements. The margin problem an owner brings us in year four usually traces back to a pricing decision made in year one that nobody has revisited since.
Why do new businesses underprice in the first place?
The usual cause is fear dressed up as strategy, combined with not knowing the true cost of delivering an hour of work. New owners price against what they earned as an employee, or against a competitor’s sticker price, rather than against their own costs plus a proper margin.
An employee on $85,000 thinks $90 an hour sounds like riches. It isn’t. Out of that hourly rate comes super, insurance, software, a vehicle or an office, marketing, unpaid admin time, quoting time, sick days, and every hour of the week that isn’t billable. When we sit down with owners and cost a delivered hour properly, the number is regularly 40 to 60 per cent higher than they’d guessed.
The other cause is quoting in a vacuum. You send a number into silence, hear nothing for two days, and convince yourself it was too high. Usually the client was just busy. But the next quote goes out lower anyway.
The clients a low price attracts, and the ones it repels
A low price filters your client base, and it filters it the wrong way. Price-first buyers are the most likely to pay late, dispute invoices, scope-creep the job and leave the moment someone quotes ten dollars less. Value buyers, the ones who pay on time and refer you to people like themselves, often read a cheap price as a warning sign and quietly move on.
| Attribute | Priced to be cheapest | Priced on value |
|---|---|---|
| Typical client | Price shoppers | Outcome buyers |
| Payment behaviour | Slow, disputed | Mostly on time |
| Referrals | More cheap clients | More good clients |
| Margin buffer | None for mistakes | Absorbs bad weeks |
| Room to hire | No | Yes |
The referral column matters more than owners expect. Clients refer people like themselves. Build a book of bargain hunters in year one and your pipeline delivers bargain hunters in year three. That’s how a single early pricing decision quietly shapes an entire business.
One more thing we notice inside businesses every week: cheap work gets treated cheaply by the person delivering it too. Owners cut corners on jobs that barely pay, resent the client, and the quality slide costs them the review or referral the job was supposed to earn.
How do you fix pricing once you’ve set it too low?
You fix underpricing in two moves: new clients get the correct price immediately, and existing clients get moved up in stages with notice. Waiting for a perfect moment to do both at once is how businesses stay underpriced for a decade.
Start with new work. Nobody quoting you for the first time knows or cares what you charged someone else in 2023. Quote your real number today. This is the fastest, lowest-risk repricing lever you have and most owners are shocked how little resistance they meet.
For existing clients, pick a date, give four to eight weeks notice, and explain the change in one or two plain sentences. No apologising, no essay about rising costs. Something like: “From 1 July our rate moves to $120 an hour. Happy to talk it through if useful.” Expect to lose a small number of clients. In most cases the maths still works heavily in your favour: lose 10 per cent of clients while lifting rates 25 per cent and revenue goes up while your workload goes down.
Before any of that, cost your delivered hour properly. Every input, including the hours you can’t bill. If you haven’t done that exercise, your price is a guess, and guesses under pressure always drift low.
Common questions about small business pricing mistakes
What is usually the cause of pricing errors in small businesses?
The most common cause is pricing from fear or from a competitor’s sticker price instead of from the true cost of delivery plus margin. Most owners have never fully costed a delivered hour, so they anchor on what feels safe rather than what the numbers require.
Does the .99 trick actually work?
Charm pricing has evidence behind it for retail and impulse purchases, but it does little for professional services. A business client reading a $4,999 proposal treats it as $5,000, and the odd number can make a quote look gimmicky rather than considered.
What are the 5 C’s of pricing?
The common framing is cost, customer, competition, channel, and compatibility with your business goals. Frameworks vary, but for a new service business the first two do most of the work: know your full cost of delivery and know what the outcome is worth to the client.
What is the biggest pricing mistake small businesses make?
Setting a launch price below cost-plus-margin and then leaving it there for years. The initial discount is survivable, but the failure to revisit it caps hiring, marketing spend and eventually the sale value of the business.
How do I raise my prices without losing all my clients?
Quote new clients at the correct rate immediately, then move existing clients up with four to eight weeks written notice and a short, unapologetic explanation. Some will leave, but a modest rate rise usually outweighs a small client loss comfortably once you run the numbers.
Should I match the cheapest competitor when I’m starting out?
No, because the cheapest competitor is often mispriced themselves or running a volume model you can’t sustain as a new operator. Price from your own costs and the value of the outcome, then compete on responsiveness and quality of delivery instead.
Won’t higher prices mean fewer enquiries?
Usually fewer enquiries but better ones, and better conversion at healthier margins. Most service businesses need a modest number of good clients, not a flood of price shoppers, and the maths favours fewer clients at proper rates almost every time.
Get a second pair of eyes on your pricing
If you set your prices in year one and haven’t seriously rebuilt them since, that’s worth an hour of someone’s time. We do this inside our Profit Reset work regularly: cost the delivered hour, find where the margin is leaking, and map out a repricing sequence that won’t spook your client base. If you’d like a first conversation about where your pricing sits, get in touch with the team at Pascal Vida Advisory. Bring your last ten quotes. That’s usually where the story is.