How to Price Your Products and Services for Profit
Pricing. It sounds simple, but almost every business hits a point where they ask:
“Is this price too high? Too low? What am I even doing?” or ‘Where do I even start?!’
Pricing is one of the most important financial decisions you’ll make in your business, and one of the easiest to get wrong.
Whether you’re launching a new product or reviewing your pricing for the year ahead, getting this right makes a massive difference to your cash flow, profitability, and your stress levels (yes, pricing anxiety is real).
At Fenwick Collective, we work with Australian-based business owners every day on pricing decisions that directly affect profitability, tax outcomes, and long-term sustainability.
Here’s a clear, simple framework to help you feel confident in pricing your products and services.
Start with What It Actually Costs You (Not Just What You Think)
Yes, this part can be boring - but it’s essential. Before you can price for profit, you need to understand what it actually costs to deliver your product or service.
That means accounting for more than just materials or labour. Your pricing should factor in:
Direct costs (examples are materials, stock, subcontractors, labour etc)
Variable costs (examples arepackaging, shipping, payment processing fees, international fees and tariffs etc)
Fixed overheads (examples are rent, subscriptions, insurance, utilities, admin time etc)
So many businesses underprice simply because they overlook the cost of creating and delivering their product. If your pricing doesn’t cover the full cost of operating, profitability can become an uphill battle, no matter how busy you are.
2. Decide What Profit You Actually Want
Once you’ve totalled up all your costs, it’s time to build in profit. And no, profit isn’t what’s left over “if things go well.” The next step is deciding how much profit your business needs to make each sale worthwhile.
Things you should keep in mind here:
Creating sustainable cash flow
Business growth and reinvestment
A fair return for your time and expertise
Pricing without a clear profit margin can lead to cases where you may sell out of your product or service, but with little to no financial reward at the other end.
3. Consider Your Market and Positioning
An important thing to remember when considering your pricing is that your price also communicates where your business sits in the market.
Ask yourself:
What are similar businesses charging?
Are customers choosing my product based on price, value, or trust?
Do you offer expertise, service, or outcomes that justify a premium price?
Pricing too low can undervalue your work and attract the wrong clients or customers. Pricing too high without clear value can lead to low sales. The right balance depends on your position in the market and your customer base.
4. Choose a Pricing Approach That Fits Your Business
There’s no one-size-fits-all pricing strategy. Every business is different and depends on so many factors. The right approach for you is dependent on how your business operates and what you’re trying to achieve.
There are some common pricing approaches that you may want to consider:
Cost-based pricing - ensuring all costs are covered with profit added on top (ie simply choosing to add a ‘markup’ on top of the total cost to make one item)
Value-based pricing - pricing based on the outcome or benefit to the customer
Market-aware pricing - using competitor pricing as a reference point, but not a rulebook
What matters most is choosing a pricing approach that works for your business model and applying it consistently. Each can work, just make sure you’re clear on why you chose your approach.
5. Review and Test Your Pricing Regularly
Remember that pricing should never be “set and forget”.
Costs change, the market shifts, your experience and reputation grow, perhaps the quality of your product improves. It’s important to review your pricing regularly (especially when circumstances change) in order to ensure your business remains profitable over time.
It could even be worth testing different pricing options over time and recording the results from each. This can really help you find the right pricing for your business, service or product.
A Smarter Way to Price: Our Pricing Calculator
Want to skip the headache of manually figuring out how to price your product or service? We know all this can sound like a lot of maths, and nobody enjoys running numbers in spreadsheets until 2am (except maybe us).
To help clients make their pricing decisions, we’ve developed a Pricing Calculator that does the work for them.
The calculator helps to:
Factor in all costs - direct and indirect
Model different pricing and margin scenarios
Understand how pricing impacts profit before going to market
Review pricing during annual planning or business reviews
Whether you’re launching something new or adjusting your existing prices, this calculator will make it feel way less intimidating.
Final Thoughts
Pricing is more than a marketing decision, it’s a financial one. The right pricing supports cash flow, profitability, and long-term business health.
By understanding your costs, building in profit intentionally, and reviewing pricing regularly, you put your business in a much stronger position for sustainable growth.
If you’d like help reviewing your pricing and understanding how it fits into your broader financial strategy, or a copy of our pricing calculator, our team is here to support you.