Cost-plus is rarely the right answer
Cost-plus pricing locks you to your own inefficiency. Value-based pricing lets you capture what the work is worth to the buyer.
Three levers to pull
1. Raise prices for new customers first
A 10% price rise on new business is invisible to existing customers and compounds over 12–18 months.
2. Re-tier your offer
Most service businesses underprice the top tier. Adding a "Premium" option at 2–3× the standard tier:
- Anchors the standard tier as the "sensible" choice
- Attracts the 5–10% of buyers who want the best
- Lifts blended margin
3. Annual price reviews
Build a clause into contracts allowing a CPI-linked annual increase. Apply it. Most clients accept it without renegotiation.
The 80/20 review
- List clients by revenue
- The top 20% usually contribute 80% of revenue
- The bottom 20% often consume 50% of admin time
- Politely raise prices on the bottom 20% — losing some of them improves margin
Don't forget VAT
If your customers are consumers, a price rise plus VAT can squeeze demand. Test on a small segment first.
Use our profitability tool to model the impact of a price change.