Being busy doesn't mean you're making money.
You can have a full calendar, customers who love your work, and more orders than you know what to do with.
And still barely be paying yourself.
That's a problem a lot of small business owners run into, especially when they're first getting started.
They know how to do the work.
They're good at what they do.
But figuring out what to charge for that work is an entirely different skill.
That was the main conversation in a recent episode of the Planting Seeds Podcast when Nick and I talked about how business owners can tell whether they're charging enough.
And one of the biggest things we kept coming back to was something that really isn't about math.
It's fear.
The fear that if you raise your prices, customers will leave.
And sometimes that fear keeps business owners from ever looking at the numbers in the first place.
Meet Carla and Her Very Underpriced Cakes
Nick introduced a completely fictional business owner named Carla.
Carla makes custom cakes.
She's good at it. Customers love her cakes. She's booked every weekend, and just about every quote she sends out gets a yes.
Sounds pretty good.
But let's look at the numbers.
Carla charges $300 for a wedding cake.
After paying for ingredients, boxes, delivery, and a portion of her overhead, she's left with $100.
At first glance, that's not terrible.
Until you find out she spent ten hours making that cake.
That's $10 an hour.
And that's before considering additional taxes or other costs she may be responsible for.
Now, neither Nick nor I claim to know what a wedding cake should cost or exactly how long one takes to make.
But the example makes the point.
Carla is busy.
Carla has customers.
Carla is doing good work.
Carla isn't charging enough.
And the scary part is that she might keep doing exactly what she's doing for years because she's afraid customers won't pay more.
Your Prices Need to Come From Somewhere
One thing we talked about was how often small business owners set prices based on what everyone else is charging.
They look at the competition.
Find out what someone down the road charges.
Then take a little off that number because they think being cheaper will bring in more customers.
That might work for getting business.
It doesn't necessarily work for making money.
Your competitor's expenses aren't your expenses.
Their overhead may be different.
Their equipment may already be paid for.
They may have employees, or they may be doing everything themselves.
And frankly, they might not be charging enough either.
So building your prices around theirs isn't much of a strategy.
You need to understand what it actually costs you to provide your product or service.
And that includes more than the obvious stuff.
Think about Carla.
It's easy to count the flour, eggs, butter, and cake boxes.
But what about the electricity?
The equipment?
The time spent communicating with the customer?
The delivery?
The hours spent decorating?
There's no such thing as free ingredients just because they're already sitting in your kitchen.
And your time doesn't become free just because you're the business owner.
You have to account for those things.
Otherwise, you're making pricing decisions without knowing what the work is actually costing you.
Being the Cheapest Is a Tough Way to Run a Business
One of the questions I asked Nick was whether being the cheapest is ever a good business strategy.
We both landed in pretty much the same place.
No.
There's a difference between being competitively priced and making it your goal to be cheaper than everybody else.
If your entire strategy is being the cheapest, you're going to spend a lot of time trying to stay cheaper.
And there's almost always someone willing to go lower.
Nick made a point during the conversation that I think is worth remembering.
If price is the only reason someone picks you, it's the only reason they need to leave.
That's true for just about any industry.
If your customers are only there because you cost less than everybody else, what happens when someone else offers the same thing for five dollars less?
You've given them very little reason to stay.
But people don't always choose a business because it's the cheapest.
They choose businesses because they trust them.
Because the work is good.
Because the service is reliable.
Because they know they're going to get what they paid for.
That's worth something.
And it's okay to charge for it.
Would You Rather Raise Prices or Find More Customers?
This was one of my favorite questions from the episode.
Would you rather raise your prices by 10% or find 10% more customers?
Nick didn't hesitate much.
Raise prices.
And once we got back to Carla, the reasoning made a lot of sense.
Remember, Carla charges $300 for a cake and has $100 left after her non-labor business costs.
If she raises her price by 10%, that cake now costs $330.
Assuming her costs stay the same, she has $130 left.
That's 30% more money available to compensate her for the same cake.
Same customer.
Same ten hours.
Same amount of work.
Now compare that to finding 10% more customers.
That means more cakes.
More ingredients.
More deliveries.
More weekends spent working.
And if she's already booked solid, where exactly is that extra time supposed to come from?
Raising prices isn't automatically the right answer for every business. You need to understand your customers, your margins, and how demand might change.
But the bigger point is that more sales don't always solve a profitability problem.
Sometimes they just create more work.
Don't Wait Five Years to Review Your Prices
Here's something that happens more often than people think.
A business owner sets prices when they get started.
Business picks up.
Customers seem happy.
And five or six years go by without those prices changing.
Meanwhile, everything else gets more expensive.
Insurance.
Software.
Materials.
Labor.
Rent.
Utilities.
All the little expenses that keep a business running.
The price you charge might be the same, but the cost of providing that service certainly isn't.
And if your costs keep increasing while your prices stay the same, you're slowly making less money.
Nick made a pretty good point about this.
When your costs go up and your prices don't, you've essentially given yourself a pay cut.
That's why we recommend reviewing pricing on a regular schedule.
At Harvest Advisory Group, we set aside time every year after tax season to look at our own operations.
What's working?
What isn't?
Have our expenses changed?
Are our prices still appropriate for the work we're doing?
It's a scheduled review.
Not a reaction to discovering we're suddenly losing money.
And I think that's an important distinction.
You don't have to raise your prices every time you review them.
But you should at least know whether they need to change.
It's a lot easier to make smaller, intentional adjustments than to wake up one day and realize you need to increase everything dramatically just to catch up.
Sometimes the Work Changes, Too
Not every price increase is about inflation.
Sometimes what you're providing simply changes.
Maybe a customer needs a faster turnaround.
Maybe the project has become more complicated.
Maybe you've added services or improved the quality of what you're delivering.
Maybe your experience has grown to the point where you're providing something better than you were a few years ago.
Those things have value.
Nick described it pretty simply during the conversation.
More work should cost more.
Faster work should cost more.
Better work can justify costing more.
And that's something I think creative professionals and service providers especially need to remember.
People aren't just paying for the finished product.
They're paying for your time, your experience, your equipment, your judgment, and your ability to do something they either can't do themselves or don't want to spend their own time doing.
Think about Carla again.
Anybody can go buy a box of cake mix.
But that doesn't mean everybody can make a beautiful custom wedding cake.
There's a reason someone hires Carla.
She needs to remember that when she's setting her prices.
Yes, Your Customers Might Complain
This is probably the part that makes business owners the most uncomfortable.
Because raising prices isn't always as simple as updating a number on a website.
Sometimes you have to tell someone directly.
And when you're a small business, those customers may be people you've known for years.
They might be friends.
They might be family.
They might be people you genuinely enjoy working with.
That makes it harder.
We talked about how people complain every time their streaming subscriptions increase.
Or when groceries cost more.
Or gas goes up.
Everybody complains about prices.
But there's something different about being a small business owner.
Your customers can complain directly to you.
They can't exactly walk into Netflix headquarters and tell the CEO what they think about their subscription.
But they can look you in the eye and tell you they're unhappy about paying more.
That's uncomfortable.
It also doesn't automatically mean your decision was wrong.
Some customers may leave.
Some may complain and stay.
Some may not think twice about it because they understand the value of what you provide.
The important thing is not allowing the possibility of an uncomfortable conversation to make your business decisions for you.
You can care about your customers and still make decisions that are financially responsible.
Those two things aren't mutually exclusive.
Your Customers Matter. But It's Still a Business.
This part of the conversation went a little deeper than pricing.
Because small business relationships can get personal.
When you've worked with someone for years, it's easy to feel like changing a price or ending a relationship is somehow letting them down.
And I understand that.
We genuinely enjoy the relationships we have with our clients at Harvest Advisory Group.
We like getting to know people.
We want their businesses to succeed.
We want to see them do well.
But sometimes what a client needs changes.
Sometimes what a business provides changes.
And sometimes the relationship simply isn't the right fit anymore.
That's okay.
You don't have to turn every business decision into an emotional one.
If the numbers are telling you that a particular product, service, or customer isn't profitable, you need to be willing to look at that objectively.
That might mean changing the price.
It might mean changing how you provide the service.
Or it might mean recognizing that it's time to move in a different direction.
None of those decisions mean you don't care about people.
They mean you're taking responsibility for the business you're trying to build.
Know Your Numbers Before You Change Your Prices
So how do you actually know whether you're charging enough?
Start by looking at what you're already doing.
Pick a product or service.
Figure out what you're charging for it.
Then calculate what it actually costs you to deliver.
Not just the obvious expenses.
All of them.
Include the time involved.
Include an appropriate portion of overhead.
If you have employees, account for their labor and related costs.
Then look at what's left.
Is that enough to compensate you fairly and produce the profit your business needs?
If not, something needs to change.
Maybe the price is wrong.
Maybe your costs are too high.
Maybe the process is inefficient.
Maybe you're spending too much time on work that doesn't generate enough revenue.
There are a lot of possible answers.
But you can't find the right one if you're unwilling to look at the numbers.
And avoiding those numbers because you might not like what they say doesn't make the problem go away.
A Full Calendar Isn't the Goal
I think this is where a lot of small business owners get caught up.
Being busy feels successful.
And sometimes it is.
But being busy and being profitable aren't the same thing.
You can work every weekend, fill every opening on your calendar, and have customers lining up to hire you.
If you're not charging enough to support the business and pay yourself appropriately, something isn't working.
The solution isn't always more customers.
Sometimes it's better pricing.
Sometimes it's better systems.
Sometimes it's simply having a better understanding of what your business is actually producing.
You shouldn't be afraid to find out.
Because the goal isn't just to build a business that people want to buy from.
It's to build one that can actually support you, your employees, and the life you're working so hard to create.
Watch the Conversation
In this episode of the Planting Seeds Podcast, Nick and I talk about pricing your products and services, understanding your real costs, knowing when to raise prices, dealing with customer complaints, and why being the cheapest isn't always a winning strategy.
We also get into whether businesses should publish their prices online and why pricing decisions need to make sense for the type of business you're running.
Planting Seeds Podcast: How Do I Know If I'm Charging Enough?
At Harvest Advisory Group, we help business owners understand what their numbers are actually telling them so they can make better decisions about pricing, profitability, and growth.
Because working harder shouldn't be the only way your business makes more money.
Sometimes you need to make sure you're charging enough for the work you're already doing.