Price Check — Are You Charging Enough for Your Services?

The Minimum Viable Rate Formula

Before thinking about what competitors charge, you need to know your floor — the minimum rate at which your business covers its costs and pays you a living wage.

(Annual overhead + owner's wage target + profit target) ÷ billable hours = minimum hourly rate

Let's work through it for a Melbourne service business. Melbourne's cost base is typically higher than regional Victoria — inner-city rent, higher award rates, competitive recruitment, and marketing costs all push overhead up:

• Annual overhead: $160,000 (rent, insurance, subscriptions, vehicle, admin, marketing)
• Owner's wage target: $130,000
• Profit target: $60,000
• Estimated billable hours: 1,200 per year

$160k + $130k + $60k = $350,000 needed. Divided by 1,200 hours = $292 per hour minimum.

If you're charging $200/hr, you're not just leaving money on the table — you're running at a structural loss on your own labour.

Why Melbourne Service Businesses Stay Underpriced

Three reasons Melbourne service businesses don't raise prices:

1. Fear of losing clients to competitors: Melbourne's competitive market makes business owners nervous about price increases. But quality clients in Melbourne choose trusted providers over cheap ones.
2. Inertia: The price was set when the business started — often when the owner was building a client base and willing to undercharge to win work. That season is over.
3. Assumption: "My clients can't afford more." Usually untrue, and rarely tested. Most Melbourne service businesses have never run the minimum viable rate calculation and don't know how far below it they're operating.

The Evidence: Clients Rarely Leave Over Reasonable Increases

A 5–10% price increase from a trusted, quality Melbourne service provider results in very low client attrition. The clients most likely to leave on a price increase are price-sensitive clients who are already your lowest-margin, most difficult work.

Losing 3–5% of your client base while increasing revenue by 8% on the remaining 95% is a straightforward win — particularly in Melbourne where the volume of potential clients makes replacement relatively fast.

How to Do a Competitor Rate Check in Melbourne

Three approaches for Melbourne:

• Get three quotes: approach three comparable Melbourne businesses as a prospective client and request a quote for a typical piece of work
• Industry associations: most Victorian trade and professional associations publish guidance on market rates
• Your enquiry conversations: when prospects mention they're getting other quotes, ask what the Melbourne market looks like — people often share

Signs You're Definitely Undercharging

• You're always busy but never have any money — fully booked, cash-poor
• You can't afford to hire help despite needing it desperately
• Every quote you send wins — a 100% quote conversion rate is not a triumph
• You have no waiting list — there's zero friction in the buying decision
• You haven't had a real pay rise in three years while Melbourne's cost of living has increased every year

How to Raise Prices in Melbourne Without the Drama

• New clients get the new rate immediately. No announcement needed.
• Existing clients get 60 days' written notice. Professional, brief, with a genuine reason.
• Don't apologise. Award rates, CPI, and Melbourne's cost base increase every year.
• Handle pushback with scope reduction. "I can deliver this for your current rate but with a reduced scope" is a better response than discounting.

Annual Price Review: A Melbourne Business Non-Negotiable

Build a price review into your July planning every year. In Melbourne's market, you're competing for skilled labour with higher wage expectations, operating with higher overheads, and serving clients who understand that quality costs money. Your pricing should reflect that reality — and it should be reviewed every year without fail.