Before putting your prices up, take a closer look at what happens after a customer says yes. The real reason your business isn’t making enough profit may surprise you.
Imagine finishing a job that looked profitable when you quoted for it.
The customer is happy. The invoice has been paid. More work is coming in.
On the surface, everything looks fine.
But when you look at what the job actually involved, the picture changes.
There were two extra meetings that weren’t in the original agreement. A few additional requests that seemed too small to charge for. Some work had to be redone. And the owner stepped in several times to keep everything moving.
None of those things looked particularly serious on its own.
Together, they turned what should have been a profitable job into one that barely covered its costs.
The obvious response might be to increase prices.
But that raises an important distinction.
Was the business charging too little, or was it delivering more than the customer actually paid for?
Those are two different problems. And they require different solutions.
The price looked right when the customer agreed
Consider a small business that quotes for a straightforward project.
The owner estimates the work, allows for costs, adds a reasonable margin and agrees a price with the customer.
Nothing unusual there.
The problem begins after the agreement.
A customer asks for a small change. Then another. Someone on the team needs clarification. The finished work isn’t quite what was expected, so part of it has to be done again.
The owner becomes involved because it’s quicker than explaining the issue to someone else.
By the time the project is complete, substantially more time has been spent than the original estimate allowed.
The customer still sees the agreed price. The business absorbs the additional work.
Over time, this becomes normal.
The team calls it customer service. The owner calls it keeping people happy. Nobody necessarily notices that the business is gradually giving away its margin.
And because revenue is still coming in, the underlying problem can remain hidden.
Why increasing prices might not solve it
A price increase can genuinely improve profitability when a business has been undercharging for the value it delivers.
But imagine increasing prices by 10% while the same inefficiencies continue.
Jobs still take longer than expected. Extra requests still go uncharged. Mistakes still require rework. The owner still spends time resolving problems that should have been handled elsewhere.
The business may recover some of its margin, but it hasn’t corrected what was causing that margin to disappear.
Worse, higher prices can create a new challenge if customers begin comparing the business more closely with competitors.
Now the owner is dealing with two problems: inconsistent profitability and greater pressure to justify the price.
The original issue is still there.
This is why the first answer isn’t always the right answer.
Sometimes a business needs higher prices. Sometimes it needs clearer agreements, better processes or more accurate estimates.
The difficulty is recognising which situation you’re actually dealing with.
Five completed jobs can tell a very different story
Rather than starting with your price list, start with work you’ve already finished.
Take five recent jobs or customer projects. They don’t need to be the largest or most complicated. Ideally, include a mixture of work that went well and work that felt more demanding.
Look at what was originally agreed and compare it with what actually happened.
For each job, establish:
- The original price and what the customer was promised.
- The amount of work and time originally allowed.
- The time, materials and other costs actually incurred.
- Any extra requests, revisions or work that wasn’t charged for.
- The contribution the job made after its direct costs.
You may begin to notice something unexpected.
The jobs that felt easiest to win weren’t necessarily the most profitable.
A customer who negotiated aggressively may also have required additional support throughout delivery.
Another customer may have paid the full asking price, accepted the agreed scope and required very little additional attention.
Even two jobs sold at the same price can produce very different financial results.
That difference is worth investigating.
It shifts the conversation away from what competitors are charging and towards what’s really happening inside your own business.
Three problems hiding behind the same disappointing result
Here’s where the investigation becomes particularly useful.
A business may appear to have one profitability problem when, in reality, three quite different situations are possible.
The work is genuinely underpriced.
The business delivers efficiently, costs are reasonably controlled, and the agreed service is provided without significant additional work.
Yet the margin is still inadequate.
In that situation, pricing deserves serious attention. The owner may need to review costs, positioning, customer value and the price being charged.
The business is giving away work.
The original price may have been perfectly reasonable.
But customers routinely receive extra services, changes, meetings or support without additional charges.
Here, the issue could be unclear scope, weak change-control arrangements or reluctance to have difficult conversations with customers.
Putting up prices won’t necessarily stop the additional work.
The business is taking too long to deliver.
The price is reasonable and customers aren’t asking for anything unusual.
But jobs move slowly through the business. People wait for decisions, tasks are repeated, information gets lost and the owner has to keep intervening.
This is an operational issue. The constraint may be in the way the work is organised rather than in what customers pay.
All three situations can produce the same visible complaint:
We’re working hard, but we’re not making enough money.
The correct response depends on which one is actually happening.
The most expensive mistake may be fixing the wrong problem
Now consider what happens when a business owner responds to disappointing profits without first identifying their cause.
They could raise prices and lose customers unnecessarily.
They could hire another employee when the existing team is losing time through poor processes.
They could invest in software without understanding where work is getting delayed.
Or they could increase marketing to win more projects that have the same weak margins as the existing ones.
Each action can appear sensible when viewed in isolation.
But more sales, more people and more technology won’t automatically make an unhealthy business model stronger.
In some cases, they’ll simply increase the scale of the problem.
This is where looking at one business issue in isolation can become misleading.
A pricing concern might actually begin in operations. A sales concern might be connected to customer experience — or reveal a problem with conversion rather than lead generation. A capacity problem might have more to do with decision-making than staff numbers.
The connections matter.
Finding the right first move
The five-job review is a useful starting point, but it doesn’t necessarily tell you which area of the entire business deserves attention first.
Suppose you discover that several jobs contain uncharged extras.
That’s worth correcting.
But suppose you also discover that most customer enquiries never convert into sales, or that the owner must personally approve almost every important decision.
Now you have several issues competing for attention.
Which one should come first?
The answer depends on where the business is today, what the owner wants to achieve, the gap between those two positions and the constraint having the greatest effect on progress.
The objective isn’t to produce a longer list of problems.
It’s to establish the priority that will make the greatest difference.
Once that priority is clear, you can turn that priority into a focused 90-day plan.
And that may not be the issue that first attracted your attention.
Before you change your prices, understand your business
Sometimes an apparent pricing problem is really time spent correcting errors or repeating work. Our cost-of-rework audit helps investigate that possibility. If the priority is still unclear, learn about the free Business Priority Check.
If you’ve been considering a price increase because your business is busy but profitability isn’t where it should be, the five-job review may give you a useful place to begin.
It might confirm that your prices need attention.
It might reveal that work is being given away.
Or it might expose an operational problem you hadn’t previously connected with profitability.
But it may also leave you with a bigger question: how does this issue compare with everything else happening in your business?
That’s exactly what the free Business Priority Check is designed to help you investigate.
It takes about three minutes to answer eight questions about your business. I personally review the answers together, looking for patterns, contradictions and connections between different areas.
You then receive a personalised Business Priority Report identifying the ONE area that appears to deserve attention first, with an explanation of the reasoning behind it.
There’s no automated score and no obligation.
If you’re no longer certain that pricing is the real problem, that uncertainty may be the most useful place to start.