OPINION - In the third instalment of our online business series, Prof Adele Potgieter turns to a topic that quietly undermines many small businesses - pricing.
It begins with a familiar story. Thandi, a house painter in George, has built a solid reputation over seven years. Her work is meticulous, her clients loyal and referrals steady.
Yet she has not increased her prices in three years. Not because her costs have stood still, but because of a fear that charging more will drive customers away.
Thandi has been painting houses in the George area for seven years. She is meticulous and reliable, and her work speaks for itself - her clients constantly refer her. She has not raised her prices in three years.
When I asked her why, she did not hesitate: “I’m scared they’ll go somewhere cheaper.”
I asked how many clients she had actually lost to pricing in the past year. She thought about it. “None, now that you mention it.”
That is the conversation this column is about. Not just what to charge - but why so many business owners charge less than they should, and what it is quietly costing them.
The real cost of underpricing
Underpricing feels safe. It feels like a strategy - keep the price low, keep the customers coming, stay competitive. But it is not a strategy. It is a slow erosion.
When you price below your actual worth, you attract the customers who are most focused on cost - which means they are least focused on quality, least loyal, and most likely to leave the moment someone cheaper appears.
You fill your calendar with work that does not pay you properly, which means you have no capacity to take on the work that would. You cannot invest in better equipment, better training, or a second pair of hands.
There is also a psychological cost that does not show up on any spreadsheet. Charging too little, over time, makes you feel like your work is worth too little.
Confidence in your price and confidence in your craft are more connected than most business owners realise.
Know your floor before you set your price
Before you can price with confidence, you need to know your floor - the minimum you can charge before you are effectively funding your customer’s purchase with your own money.
Your floor is not just your materials or your direct costs. It includes your time, valued honestly. It includes your vehicle, your equipment, your phone, your insurance, your slow months, and a reasonable return for the risk of running a business. Most small business owners, when they sit down and calculate this properly for the first time, find that their current price is below their floor - or barely above it.
What the customer is actually paying for
Cost-based pricing asks: what does this cost me, and what margin do I add? Value-based pricing asks a different question: what is this worth to the customer?
These are not the same number. Often, they are not even close.
A George electrician charges R850 for a two-hour call-out. His cost, time, fuel, equipment depreciation is perhaps R420. But the customer is a retired couple whose lights have been off for two days and who are anxious and out of their depth. What they are paying for is not two hours of electrical work. They are paying for competence, reassurance, and the restoration of normal life. The value of that to them is significantly higher than R850.
This is not about exploiting customers. It is about pricing honestly to the value you deliver.
This is where your customer profile from the second article in this series becomes directly useful. If you know what your customer fears, what they value, and what the alternative would cost them, you can set a price that reflects reality, not just your discomfort with charging what you are worth.
How to raise your price without losing your customers
The conversation Thandi dreads, telling a loyal client that her prices are going up, is almost never as difficult as she imagines it will be.
The clients who value her work, who refer her, who leave her five-star reviews, will not leave over a 10% or 15% increase, communicated honestly and in advance. The ones who might leave are the ones who were never really her customers in the first place. They were customers of her low price. And losing them is not a loss.
The language matters. Not “I’m increasing my prices” as an apology, but: “As of next month, my rates will be adjusted to reflect the current cost of materials and my commitment to the quality of work you expect from me. I wanted to let you know personally.” That is not an apology. That is a statement of confidence.
The three Cs of confident pricing
- Costs: Know your floor. Calculate every real cost, including your time at a fair rate. Price below this and you are paying your customer to hire you.
- Comparison: Know the market. What do comparable businesses charge? Your price is a signal. Too far below the market and you signal low quality, not good value.
- Ceiling: Know what your customer is really paying for. Value-based pricing means pricing to what you solve, not just what you do. That ceiling is usually higher than you think.
This week’s exercise: Your pricing floor
For your main product or service, sit down and calculate the true cost of delivery.
Include:
- direct costs: materials, consumables, any subcontractors
- time: your hours at an honest hourly rate (what would you pay someone else to do what you do?)
- overhead: your share of vehicle, equipment, insurance, phone, admin
- risk premium: a small buffer for slow months and unexpected costs.
That total is your floor. If your current price is below it, you are not running a business. You are running a very expensive favour.
Next column: The people inside your business - why they stay, why they leave, and what great management actually looks like.
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