Topic hub
Pricing & Profit
Price for the business you want, not the one you have.
Underpricing is the quietest way to fail. It feels like a growth strategy, but it usually just produces more work for less margin.
This hub covers building a price from profit backwards, calculating day rates, and the difference between mark-up and margin.
Written by Daniel, peer-reviewed by Sarah
Last reviewed:
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Pricing for Profit
The core method: starting from the margin you need, not the cost you paid.
Read the guideChoose your next move
A decision map for this topic
Start with the problem in front of you, then follow the related guide instead of reading the whole library at once.
I need to know what each sale contributes
Separate price, variable cost and contribution before considering volume, discounts or a price rise.
Open the guide →I am considering a discount
Treat the offer as a finite contribution and demand test with clear price-promotion controls.
Open the guide →I need to change prices
Test the commercial case, customer scope and price transparency before announcing a change.
Open the guide →Where it hurts
Common problems in this area
Pick the sentence that sounds most like your week.
“I am busy but I am not making money”
High volume can hide low margins until the tax bill or a quiet month arrives.
Where to start“I do not know my break-even point”
You need to know exactly how much you have to sell just to keep the lights on.
Where to start“I set my day rate years ago”
Inflation, experience and overheads have moved. Your rate should too.
Where to startRead by job
Grouped guides with a clear purpose
These routes organise the most useful child guides by the decision they help you make; the complete library remains below.
Build a profitable base price
Use margin, contribution, break-even and VAT guidance to understand the economics behind a quote.
- Pricing for ProfitWhy cost-plus pricing quietly bankrupts good businesses, and a straightforward method for pricing that protects your margin instead of just covering your costs.
- Contribution Margin: what each sale contributes before fixed costsCalculate contribution per sale and contribution percentage, distinguish variable from fixed costs, and use the result to test pricing and growth decisions.
- VAT and Pricing: protect margin when tax changes the numberA practical guide to VAT-inclusive and VAT-exclusive pricing, discounts, invoices and margin protection for UK small businesses.
- Break-Even Point ExplainedThe break-even point is the exact moment your business stops costing you money and starts making it. How to calculate it, and why it matters more than revenue.
Change prices without losing control
Use structured, customer-aware tests for discounts and price rises rather than reacting to pressure ad hoc.
- Discounting: test demand without giving away your marginPlan a controlled discount with a contribution test, clear customer price information, finite scope and a post-campaign review.
- Price Rises: protect margin without surprising customersA practical UK small-business process for testing a price rise, checking contracts and price transparency, communicating clearly and measuring the result.
- How to Calculate an Hourly or Day RateA step-by-step method for setting a rate that covers your costs, your time off, and a genuine profit — instead of dividing last year's salary by 365.
Complete library
All guides in Pricing & Profit
Guide
Contribution Margin: what each sale contributes before fixed costs
Calculate contribution per sale and contribution percentage, distinguish variable from fixed costs, and use the result to test pricing and growth decisions.
ExploreGuide
Price Rises: protect margin without surprising customers
A practical UK small-business process for testing a price rise, checking contracts and price transparency, communicating clearly and measuring the result.
ExploreGuide
Discounting: test demand without giving away your margin
Plan a controlled discount with a contribution test, clear customer price information, finite scope and a post-campaign review.
ExploreGuide
Pricing and utilisation: use capacity without underpricing
Measure usable capacity, billable utilisation and contribution before changing prices, taking extra work or offering a quiet-period discount.
ExploreGuide
Pricing for Profit
Why cost-plus pricing quietly bankrupts good businesses, and a straightforward method for pricing that protects your margin instead of just covering your costs.
ExploreGuide
How to Calculate an Hourly or Day Rate
A step-by-step method for setting a rate that covers your costs, your time off, and a genuine profit — instead of dividing last year's salary by 365.
ExploreGuide
Mark-Up vs Margin
Mark-up and margin sound interchangeable and are not. Confusing them quietly erodes profit on every sale. Here is the maths, side by side, with a worked example.
ExploreGuide
Break-Even Point Explained
The break-even point is the exact moment your business stops costing you money and starts making it. How to calculate it, and why it matters more than revenue.
ExploreGuide
VAT and Pricing: protect margin when tax changes the number
A practical guide to VAT-inclusive and VAT-exclusive pricing, discounts, invoices and margin protection for UK small businesses.
ExploreSubtopics
What this hub covers
Pricing strategy
Cost-plus, value-based, and why 'market rate' is often a trap.
Margin vs Mark-up
The arithmetic that trips up most owners.
Overheads
Identifying the hidden costs that eat your profit.
Rate setting
Hourly and day rates for freelancers and consultants.
Featured tool
Break-Even Calculator
Find the exact revenue or volume you need to cover your fixed costs.
Open the toolFree checklist
Pricing review checklist
Questions to ask before sending your next quote.
- Does this price cover my direct costs and my time?
- Does it include a contribution to my annual overheads?
- Does it leave the net profit margin the business requires?
- Have I accounted for transaction fees and delivery?
- Is the scope clearly defined to prevent 'creep'?
Frequently asked questions
- How often should I increase my prices?
- At least once a year, to account for inflation and rising overheads. Small, regular increases are easier for customers to accept than one large jump every three years.
- What is a healthy profit margin?
- It varies by industry, but for most small service businesses, a net profit margin of 15-25% is a healthy target after the owner has been paid a fair wage.
Keep reading
Related guidance
How Pricing & Profit connects to the rest of the site, and what to read alongside it.
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Next steps in Pricing & Profit
- 1
Read Pricing for Profit
The core method: starting from the margin you need, not the cost you paid.
Read the guide - 2
Run the Break-Even Calculator
Find the exact revenue or volume you need to cover your fixed costs.
Open the tool - 3
Score your whole financial setup
Ten areas in about five minutes, with a seven-day and 30-day plan you can print.
Start the check-up - 4
Then move on to Know Your Numbers
The handful of figures that actually tell you how the business is doing.
Open the hub