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Pricing Adequacy Calculator

Is your pricing good enough?

Enter your revenue, costs, and target margin to see if your current pricing covers the business—and by how much you'd need to raise prices to hit your target.

Enter Your Numbers

Total sales for the year (or projected if mid-year).

Labor, materials, subcontractors—costs directly tied to jobs.

Rent, insurance, vehicles, utilities, office staff—costs that exist regardless of jobs.

What you pay yourself (or should pay yourself) annually.

What profit margin do you want after all costs including your salary?

The Pricing Reality Check

Most service businesses underprice. They set rates based on what competitors charge or what feels acceptable, not on what the business actually needs to be healthy.

This calculator works backwards from your target margin. If you want to make 15% after paying yourself, after overhead, after direct costs—what does revenue need to be?

The Owner Salary Trap

Many owners don't include their own salary in pricing calculations. They look at profit and think "that's my pay." But that's not profit—that's compensation for your labor.

Real profit is what's left after you pay yourself a market salary for the work you do. If you couldn't afford to hire someone to replace you, your pricing is subsidized by your unpaid labor.

Why Target Margins Matter

The CFMA 2025 Construction Financial Benchmarker shows median net profit margins of 6.7% for construction companies. Service businesses typically target 10-20% net margins to be healthy.

  • 5% margin: Survival mode. One bad job wipes out your profit.
  • 10% margin: Stable but tight. Limited room for error or investment.
  • 15% margin: Healthy. Can absorb problems and fund growth.
  • 20%+ margin: Strong. Building real wealth and business value.

How to Raise Prices

  1. Start with new customers — Existing customers can stay at current rates while you test higher prices
  2. Raise on renewals — Annual contracts are natural price adjustment points
  3. Add value first — Bundle in something new, then raise the total price
  4. Fire unprofitable customers — Sometimes the right price is "we can't do this work"

Sources

Frequently Asked Questions

How do I know if my pricing is adequate?

Your pricing is adequate when your net profit margin (after paying yourself a market salary, covering all overhead, and subtracting direct costs) meets your target. Most service businesses need at least 10-15% net margin to be healthy. If your margin is below 5%, one bad job can wipe out your profit for the period.

Should I include my own salary in pricing calculations?

Yes, always. If you do not include a market-rate salary for yourself, you are subsidizing the business with unpaid labor. Real profit is what remains after you pay yourself what it would cost to hire someone to do your job. Many owners confuse their compensation with profit, leading to chronic underpricing.

What net profit margin should a small business target?

It depends on your industry, but general ranges are: 5% is survival mode with no buffer for mistakes, 10% is stable but tight, 15% is healthy with room to invest and absorb problems, and 20% or more is strong and building real business value. The CFMA reports median construction net margins of 6.7%.

How much should I raise my prices?

Start by calculating the gap between your current net margin and your target. If you need a 12% price increase, consider implementing it in stages: raise prices immediately for new customers, adjust on contract renewals, and bundle additional value with existing customers to justify the increase. Most businesses lose fewer customers than they fear.

What is the best way to raise prices without losing customers?

Start with new customers first, who have no price anchor. For existing customers, raise prices at natural renewal points (annual contracts, seasonal restarts). Add value before raising price: bundle in a new service, improve response times, or add reporting. Fire unprofitable customers rather than continuing to lose money on them.

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