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Pricing your services as a contractor

Written by Fitzpatrick Group • Accountant
Published on 04 Mar 2019

It is difficult to determine how much to charge for a service. If the prices are set too high, you might price your customers out of your service whereas you can also affect your profits if you set your prices too low.

As a contractor, you need to consider whether you will charge an hourly rate or provide a fixed price. The rate you charge needs to cover costs such as:

  • Insurance
  • Tax
  • Worker’s compensation
  • Leave provisions
  • Superannuation
  • Training & licensing fees
  • GST


Successfully achieving the right price can also help your business services within the market and meet profit goals, therefore it’s important to consider pricing as part of both your finance and marketing strategies. External factors can also influence pricing and is the key to finding an optimum price for your services.

Before selling products or services within a business, it is crucial that you conduct market research, analyse your data and consider how the results from your research will impact your pricing. Accurate market research will help you successfully navigate your product and services, saving you both money and time.

The following external influences should be taken into consideration when pricing your services and products.

Price sensitivity in the market

Price sensitivity in the market refers to the changes in customer demand as price changes. Some markets are more sensitive to price increases than others. Factors other than prices such as quality, service and uniqueness can also influence price sensitivity.

Level of demand

In general, the demand for your services will also have a great influence on price. Generally, the higher the demand, the higher you can price for your services. Competition within your market will also determine how your product and/or services are priced.

Level of competition 

Competition can impact your price and its sensitivity too, the less competition you have, the higher the demand there is for your product and/or services, the more you can charge. 

Researching price influences

Research can help you find the optimum price for your services which is the price your customers are willing to pay, without it affecting your profits. This is not a one-off activity, you need to continuously monitor your key pricing influences as part of your overall market research to ensure your prices stay competitive and you still meet your customers’ expectations.

Examples of this may include competitors at lower and higher price points, similar products of differing quality and more.

Market testing

To help you determine how much you’re your customers are willing to pay for your products/services you need to perform some form of market testing and as a start research your customer’s purchasing behaviour for example – their current and anticipated demand for this type of service, what they pay for similar service, additional features they value. With this customer information in mind, you can then develop a price comparison offering different service options for testing to help you determine a price range that is acceptable.


You should have already determined who your direct competitors are and how your business compares to them. This information can be useful in helping you determine your price point. When you compare your business to competitors, it is important to ensure you look at the business as a whole and compare on other value-based traits for example – special features, quality and customer service as well as price.

Consult an experienced business adviser, accountant or solicitor to get guidance on pricing your services for customers.

Check out another recent blog in this category.

Need help with pricing your services and/or products?