Why do small businesses get pricing wrong?
Most new businesses price by copying a competitor or guessing what a customer will pay. The problem is that the competitor may have different costs, or may be losing money. If you don't know your own cost per job, you can't know whether a job makes or loses money.
How do I calculate my cost per job?
Split your costs into two groups:
- Direct costs change with each job: labour hours, materials, products, fuel and travel
- Overheads are paid whether or not you have work: rent, phone and data, insurance, accounting, software, marketing and your own salary
Work out your overheads per month, then divide them by the number of jobs or billable hours you realistically expect. That gives the overhead share each job must carry.
How do I include staff costs correctly?
Use the full cost of an employee, not just the wage. Include UIF (1% employer contribution), COIDA, leave, public holidays, uniforms and transport, and SDL if your payroll is over R500,000 a year. Wages must be at least the national minimum wage, R30.23 per hour from 1 March 2026, or higher where a sectoral determination or bargaining council sets more.
How do I add a profit margin?
Add a margin on top of your total cost. The margin pays for growth, slow months and risk, not only your income. Be clear about the difference:
- Markup: profit as a percentage of cost (cost R1,000, 25% markup = price R1,250)
- Margin: profit as a percentage of price (price R1,250, profit R250 = 20% margin)
A worked pricing example
The figures below are only an illustration:
| Item | Amount |
|---|---|
| Labour: 6 hours x R45 full hourly cost | R270 |
| Materials and products | R120 |
| Transport | R80 |
| Share of overheads | R100 |
| Total cost | R570 |
| 25% markup | R142.50 |
| Price before VAT | R712.50, round to R715 |
How does VAT affect my prices?
If your business is registered for VAT, add 15% VAT to your price and pay it over to SARS. Consumers expect prices that include VAT; business clients often compare prices excluding VAT. Registration is compulsory once taxable turnover exceeds R2.3 million in 12 months (from 1 April 2026). If you are not registered, do not charge VAT.
What if the market won't pay my price?
Don't simply drop the price below cost. Instead:
- Change the scope: offer a smaller, cheaper package
- Become more efficient: better equipment, route planning, fewer wasted hours
- Target customers who value what you do best
- Charge separately for extras that cost you money
How do I price a tender?
Price tenders from the specification, not from the previous winner's price. Include wages at legal rates for the full contract period, escalation over multi-year contracts, and every compliance cost. Unrealistically low prices can be rejected, and winning at a loss can break your business. See how to get government tenders.