Service pricing: how to stop guessing your prices

Many shops still set prices by looking at the competitor next door or "what the customer will pay". The problem is that without calculation, you may be working at a loss without realizing it. Pricing involves analyzing costs, perceived value, competition and the market. To make real profit, you need to swap gut feeling for data. Here is how to approach service pricing strategically.

How to price your services

Calculate all your costs

Before setting a price, you need to know what it costs to deliver the service. Consider:

• fixed costs: do not change with sales volume, such as rent
• variable costs: rise with production or sales
• direct costs: tied directly to each job, such as parts and supplies
• indirect costs: needed to run the business but not linked to a specific job.

Add it all up, and do not forget to include your own owner's draw.

Set your profit margin

With costs mapped, set the profit percentage you want. Profit is not what is left over; it is what you plan to earn. Your margin must allow you to reinvest, build a reserve and pay yourself and your team, while also reflecting your growth goals.

For a reference cost per job, divide monthly costs by the average number of jobs per month. That tells you the minimum each job needs to cover.

Consider perceived value

Price is not just cost plus profit. It also depends on the value the customer places on the service. A service with high perceived value can command a higher price even if it does not cost more. That perception is shaped by:

• quality
• benefits
• differentiators.

Calculate the markup

Markup is the factor that, multiplied by direct cost, produces a price covering your expenses and target margin.

Markup = 100 ÷ [100 − (VE% + FE% + TP%)]

Where:

VE% = variable expenses as a percentage of the selling price;

FE% = fixed expenses as a percentage of the selling price;

TP% = target profit percentage.

Fictional example: the direct cost of the service is R$ 50.00, with VE = 15%, FE = 10% and TP = 20%.

Markup = 100 ÷ [100 − (15 + 10 + 20)]

Markup = 100 ÷ 55

Markup ≈ 1.82

To get the selling price, multiply direct cost by the markup:

Selling price = R$ 50.00 × 1.82 ≈ R$ 91.00

The risks of pricing by guesswork

• unpredictable revenue: without a method, results swing
• hidden losses: you may be charging below your real cost without noticing
• unknown margins: without calculation, you cannot know your real profit or plan investments
• lost competitiveness: prices that are too high drive customers away, and prices that are too low undervalue your work.

Count on the Onmotor system

With costs recorded in a system, pricing with confidence is easier. Onmotor, developed in Brazil, helps organize the shop from opening the work order to after-sales follow-up. Explore the system or talk to our team.