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We here at BROC believe that pricing is one of the most important financial decisions a business makes, yet it is often one of the least reviewed. Many businesses increase prices only when costs rise significantly, leaving years of small cost increases, additional work and changing market conditions to quietly erode their margins. If your prices have not been reviewed recently, your business could be working harder for less profit.

The Hidden Impact of Underpricing

Underpricing can be difficult to recognise because it rarely creates an immediate crisis. Customers continue buying, sales remain strong and the business appears busy. The problem becomes visible when you look at what is left after all costs have been paid.

A product or service that generates €100 in revenue might appear successful. If the total cost of delivering it has increased from €60 to €75, however, the profit has fallen from €40 to €25. Multiply that reduction across hundreds of sales and the financial impact can become substantial.

Underpricing can also create a false sense of growth. Turnover may increase while profitability remains flat or even declines.

When Did You Last Review Your Prices?

Pricing should not be treated as a decision that is made once and forgotten. Costs change, suppliers increase their prices, wages rise, technology evolves and customer expectations develop.

Consider when you last reviewed:

• Supplier and material costs

• Staff and employment costs

• Rent, utilities and other overheads

• Insurance and professional fees

• Software and subscription costs

• Delivery and fulfilment expenses

• The amount of time required to deliver each service

• Your desired profit margin

If several of these have increased since your current prices were established, your margins may have deteriorated without you realising it.

Are You Charging for Your Time Properly?

For service businesses, underpricing is often linked to time.

A project may have been priced based on the expected work involved when it was first offered. Over time, additional meetings, phone calls, revisions, administration and client support can become part of the service without being reflected in the price.

For example, a service priced at €1,000 might initially have taken ten hours to complete. If changes to your process mean it now takes fifteen hours, the effective hourly return has fallen by one third.

This is why businesses should regularly assess the actual time and resources required to deliver their products and services. Your price needs to reflect the value you provide as well as the cost of providing it.

The Difference Between Price and Value

One of the biggest concerns business owners have about increasing prices is losing customers. That concern is understandable, but it should not automatically prevent a pricing review.

Customers do not always choose based solely on price. Reliability, expertise, quality, convenience, service and results can all influence purchasing decisions.

If your business provides significantly more value than competitors offering cheaper alternatives, competing solely on price may weaken your position.

A better question is often: What value does the customer receive, and does our current price properly reflect it?

Understanding this can help you move away from simply calculating costs and adding a small margin. Pricing should take account of the value of your offering and the position you want your business to occupy in the market.

The Cost of Being Too Cheap

There can also be strategic disadvantages to underpricing.

Low prices can attract customers who are highly price-sensitive and less loyal. They may move to another provider when they find a cheaper alternative. Meanwhile, a business with stronger margins has more capacity to invest in service, staff, technology and customer experience.

Underpricing can also put pressure on business owners. When margins are tight, there is less money available for unexpected expenses, investment or growth.

A sustainable business needs sufficient margin to absorb setbacks and fund its future.

Look at Profitability, Not Simply Sales

One of the most important questions to ask is whether each product or service is genuinely contributing to your bottom line.

A high-volume product with a low margin may generate substantial turnover but contribute less profit than a lower-volume service with stronger margins.

Reviewing your sales by product, service, customer or business area can reveal where your strongest returns are coming from.

You may discover that your most popular offering is not your most profitable. That insight could influence where you focus your marketing, sales activity and resources.

How to Review Your Pricing

A pricing review does not have to mean increasing every price immediately.

Start by understanding your numbers. Calculate the direct and indirect costs associated with each product or service and assess the margin being generated.

Then consider your competitors, your positioning and the value you provide. Look at how long your prices have remained unchanged and identify any significant changes in your costs.

You could then consider different pricing options, such as increasing prices gradually, introducing premium packages, charging separately for additional services or restructuring your offering.

The important point is to make the decision based on financial information rather than instinct alone.

Make Pricing Part of Your Financial Review

Pricing deserves regular attention, particularly when costs and market conditions are changing.

A business can have strong sales, loyal customers and an impressive turnover figure while still leaving significant profit on the table. Reviewing your pricing can help identify whether the work you are doing is generating an appropriate return.

Your accountant can also help you examine margins, profitability and financial forecasts, giving you a clearer picture of the impact different pricing decisions could have on the business.

The question is not simply whether customers are willing to pay your current price. The bigger question is whether your current price allows your business to remain profitable, resilient and capable of growing.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.

If you would like to discuss your business, contact us by email freda@broc.ie or visit [$ur*l].