The short answer
Many founders underprice their services due to competition and fear. Learn how to price based on value, not pressure
Most founders underprice. They leave a job believing they can do it better, then discover business is hard, competition is real and revenue stress pushes them to win work at any price. In our experience, 80 to 90% of businesses we see start out underpriced. The fix is to price for the value you deliver, understand your margins and position your service with confidence.
Why do founders underprice?
You start with a strong belief: I can be a better broker, builder, marketer or accountant. And you probably are. But in the early months there’s no money coming in, the pressure builds, and the instinct becomes: I have to win this deal, I’ll do it cheaper. Each discounted job sets the expectation for the next one.
What does underpricing cost you?
Thin margins that leave no room for mistakes or growth
Burnout, because you need more clients to earn the same
A weaker brand, as low prices attract price-driven clients
Harder price rises, because existing clients anchor to the old price
How do you fix it?
Know your numbers. Work out your cost to deliver, your overheads and your own wage. Price must cover all three plus profit.
Define your value. What problem do you solve, and what is that worth to the client? Faster results, less risk, better outcomes.
Position clearly. Explain why you’re different. Clients pay more when they understand what they’re getting.
Package your services. Fixed packages with clear scope reduce comparison on hourly rates.
Raise prices in steps. Start with new clients, then review existing clients with notice.
Will I lose clients?
Some, possibly, usually the most price-sensitive ones. Many businesses find that a modest price rise loses very few clients and lifts profit significantly, freeing time to serve better clients well.
A typical Melbourne scenario
A Moonee Ponds builder priced renovations to win against bigger firms and was always busy but barely profitable. With his accountant, he mapped his true costs, added a project management fee and explained the value of his fixed-price, on-time approach. He lost two small jobs but won larger ones at better margins, and profit doubled within a year.
Key takeaways
Most founders underprice under early revenue pressure.
Underpricing squeezes margin, brand and your own energy.
Price for value, backed by clear numbers and positioning.
Raise prices in steps, starting with new clients.
General information only.
Read how to work out what your service is worth and what are the factors of pricing?, or see our business coaching and small business advisors services.
Leader of the herd. Shehan's career has spanned professional services, finance, banking, and strategy. He started Elephant to connect busy, ambitious people with the proactive financial advice they need to make great life decisions. He built the kind of firm he always wished existed - and then showed up in trackie-dacks to run it.
