You know what you charge. You could quote your most common job in your sleep.
But what did that job actually pay you? Not the number on the invoice. What was left for you after everything else got paid, divided by the hours you put in?
Most owners have never run that number. I don’t think it’s because they can’t. I think it’s because part of them already suspects the answer. A bad answer means raising prices, and raising prices means somebody might say no.
So here’s the short answer. Figure out what you actually keep per hour on a typical job. If that number embarrasses you, your prices are too low.
The rest of this post is how to find that number and what to do about it.
What did that job actually pay you?
This week, Carla makes custom cakes. She’s booked every weekend, her customers love her work, and just about every quote she sends gets a yes.
Take one of her $300 wedding cakes.
Before the math, one idea worth getting straight. Some costs come with every cake: the ingredients, the boxes and supports, the drive to the venue. Make one more cake, and you pay them again. Other costs show up no matter how many cakes you make, like rent. Those still have to get paid, so every cake has to carry its share.
Here’s how Carla’s $300 breaks down:
Carla’s wedding cake
Amount
Price of the cake
$300
Ingredients
–$120
Boxes and supports
–$25
Delivery
–$20
Share of rent
–$25
Left for Carla
$110
So Carla keeps $110 for that cake. Now comes the part most owners skip: the hours. The consult with the bride, the baking, the decorating, the delivery, the cleanup. Fourteen hours in all.
$110 ÷ 14 hours = $7.86 an hour.
That’s less than eight dollars an hour for the person with the skill, the reputation, and the booked-solid calendar. She’d make more running a register at the store where she buys her flour, and nobody would text her at 10 p.m. about fondant.
That’s the number that matters. Not what the cake sells for. What it pays the person making it.
Three signs you’re not charging enough
Carla’s situation shows the three biggest warning signs. All three are easy to mistake for good news.
First, she’s booked solid. A full calendar feels like success. But if you’re always full, more people want what you do than you can handle. That’s demand telling you the price is below what the work is worth.
Second, nobody pushes back. If every quote gets a yes, you’re nowhere near the top of what people will pay. A healthy price gets the occasional “Hmm, that’s more than I expected.” If you never hear it, you’re leaving money on every job.
Third, her own time is what’s getting squeezed. When prices are too low, something has to give, and it’s usually the owner. The late nights. The skipped Saturdays. The paycheck that comes last. Your customers aren’t covering that cost. You are.
Any one of these can show up in a healthy business. All three at once, plus a bad hourly number, means the price is wrong.
Why a small raise does more than you think
Here’s what scares most owners: “If I raise prices, I’ll lose customers.” Maybe a few. So let’s see what that actually costs.
Raise Carla’s cake 10%, from $300 to $330. Her costs don’t change. The flour doesn’t know she raised her prices. So the whole extra $30 goes to her.
She goes from keeping $110 to keeping $140, for the same fourteen hours. That’s a 27% raise from a 10% price change. Her hourly pay goes from $7.86 to $10.
Compare that to finding 10% more customers. That gets her 10% more money and 10% more baking. Same hourly pay, more hours.
Now say the raise does cost her some business. Say one out of every five customers walks.
Cakes
Kept per cake
Total kept
Hours
Old price
5
$110
$550
70
New price, one walks
4
$140
$560
56
She makes a little more money and works fourteen fewer hours. That’s a whole wedding cake’s worth of her life back.
It’s also why trying to be the cheapest in town is a trap. Somebody bigger can always go lower. And the customers you win on price alone are the first ones to leave when someone undercuts you.
When should I raise my prices?
The best answer is on a schedule.
Pick one month every year to review your prices, the same way you’d schedule an oil change.
When the review is already on the calendar, you’re not deciding each year whether you’re brave enough. You’re just doing the review. Fear doesn’t get a vote.
Between reviews, two things should move you sooner. The first is when your costs jump. If ingredients, rent, or labor go up and your prices don’t, you just took a pay cut you never agreed to. The second is when you add value: a new service, faster turnaround, better results. More value should cost more.
When you do raise prices, keep the increases small and regular instead of big and rare. A few percent every year goes down a lot easier than 25% after five years of nothing. And give customers 30 to 60 days’ notice, so nobody finds out from an invoice.
Math first, courage second
Your price isn’t a guess about what customers will put up with. It’s a number you can work out, the same way we just did for Carla. Start with what a job pays you per hour. If it’s bad, raise your prices, on a schedule and in small steps.
It still takes a little nerve. But once you’ve done the math, you know exactly why you’re doing it.
It’s math first, and courage second.
So here’s your one thing for this week. Take your last finished job. Subtract what it cost you, including your share of rent. Divide what’s left by the hours you put in. Write that number down.
Josh and I talk through Carla’s cake on Episode 11 of Planting Seeds: EPISODE 11. And if you’re weighing a price increase against adding more help, Episode 14 is the one to watch next: Watch Now.