Are You Charging Enough? How Underpricing Hurts Your Business

How You're Losing Your Profits by Not Understanding All of the Costs of Running Your Business

Many small service businesses work hard every day—but still struggle to make enough money. Why? One big reason is underpricing.

Let’s break it down: underpricing means setting your prices too low. You might be trying to win customers or match your competitors, but if you don’t price your services correctly, you could be working all the time and barely making a profit. In fact, around 77% of small businesses that fail do so because they didn’t price their services properly or forgot to include all costs when quoting jobs (Preferred CFO).

The Real Cost of Underpricing

Imagine you're a contractor. You quote a client $5,000 for a kitchen remodel. You figure it’ll cost $3,500 in materials and labor, so you’ll make $1,500 in profit. Sounds good, right?

But here’s what many business owners forget:

• Gas and travel time to the job site

• Slight increases in material prices

• Tool wear and tear

• Insurance, office rent, and other overhead costs

When those extra costs add up, that $1,500 disappears. You might even lose money. Do that over and over, and it becomes very hard to keep your business alive, let alone grow it.

Without enough profit, you can’t invest in better tools, hire help, or save for slow months. It feels like you’re always behind, no matter how hard you work.

How a Fractional CFO Can Help

That’s where a fractional CFO can make a big difference. A fractional CFO is a part-time chief financial officer who helps small businesses manage their money like the pros.

One of their top jobs is fixing pricing problems. They don’t just guess what you should charge – they do the math.

Here’s how they help:

1. Understand Your True Costs

A fractional CFO will dig into the real cost of doing business. They look at:

• Labor and materials

• Equipment repairs or replacements

• Mileage and fuel

• Rent, insurance, software, and utilities

They make sure every cost is included in your pricing model, not just the obvious ones.

2. Choose a Better Pricing Method

Most small businesses just guess or copy the competition. A fractional CFO can set up a smarter system, like:

• Cost-plus pricing: You add a specific profit percentage on top of your total costs. For example, if a job costs $4,000 and you want a 25% profit, you charge $5,000.

• Value-based pricing: You charge based on the value to the customer, not just the cost. If your service saves them $10,000 in headaches, they might gladly pay $6,000 – even if your cost was only $3,000.

3. Study the Market and Competition

A fractional CFO will also look at what others are charging, but they won’t copy blindly. They help you stay competitive and profitable. That means you charge what your services are truly worth – no more racing to the bottom.

4. Track Each Job’s Profit

They’ll help you set up job costing systems to track the real cost and profit of each project or service. This way, you can:

• See which jobs make the most money

• Find services that always lose money

• Decide where to raise prices, or cut offerings that don’t pay off

5. Adjust Prices Over Time

Costs go up. Inflation happens. If your prices stay the same year after year, your profit shrinks. A good CFO builds regular price reviews into your business so you never fall behind.

Why It Matters

Profit isn’t just money in your pocket. It’s what powers your business. Profit lets you:

• Hire and keep great workers

• Invest in better tools and training

• Survive slow seasons

• Grow stronger over time

When you price correctly, you stop chasing pennies and start building something solid.

In Summary

Underpricing services is a silent killer for many small businesses. You might feel busy and booked—but without the right pricing, you’re just spinning your wheels.

A fractional CFO helps by:

• Understanding your full cost structure

• Setting profitable pricing strategies

• Analyzing the market

• Tracking job profitability

• Keeping prices updated

If you’re tired of working hard and not seeing the payoff, it’s time to look at your pricing. Don’t leave money on the table. With the right strategy, your business can finally get the profit (and peace of mind) you deserve.

Need help setting your pricing practices? A fractional CFO could be your next smartest move. Book a no-obligation call today and let’s talk. Click below:

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