Pricing starts with knowing what it actually costs you to deliver the service. Most small business owners skip this step and price based on what competitors charge or what feels right. Both approaches can work temporarily, but neither tells you whether you’re making money on the work you do.

Calculate your direct costs for each service or project first. For a service business, this usually means labor (including your own time if you’re doing the work), materials, subcontractor costs, and any project-specific expenses like permits or equipment rental. These are the costs that disappear if you don’t take the job.

Then factor in your overhead. Rent, insurance, vehicle payments, software subscriptions, phone bills, marketing, office supplies. All the costs you pay whether you have one client or fifty. Add these up for the month and divide by the number of billable hours or jobs you can realistically handle. That gives you an overhead cost per unit of work. Most owners dramatically underestimate this number because they’ve never actually calculated it.

Don’t forget to pay yourself. A surprising number of business owners price their services without including their own salary as a cost. If you’d need to pay someone $70,000 a year to do what you do, that’s a real cost of running the business. Profit should exist on top of your compensation, not instead of it.

Once you know your total cost to deliver a service, add your target profit margin. For most service businesses, a 15% to 25% net margin is a reasonable goal, though this varies by industry. If your all-in cost to complete a job is $5,000 and you want a 20% margin, you need to charge at least $6,250.

The harder part is staying profitable over time. Costs change. Insurance goes up, materials get more expensive, you hire someone new. If you set prices once and never revisit them, your margins slowly erode without you noticing. Review your actual costs against your pricing at least quarterly to make sure the math still works.

This is where accurate financial records become essential. You can’t calculate true costs from memory or a shoebox of receipts. You need categorized expenses, overhead tracked monthly, and ideally job-level or service-level cost tracking so you can see which offerings make money and which ones are quietly losing it. Working with a small business accounting firm gives you the accurate cost data you need to price with confidence instead of guessing.

If you already have clean books and want to take it further, financial strategy work can help you analyze your margins across different service lines, identify where you’re leaving money on the table, and build a pricing structure that supports the growth you’re aiming for. The numbers are already in your books. You just need someone to translate them into decisions.