A full diary is not much of a win if every job leaves you with less than it should.
To improve profit margins in a small business, compare what you charge with what the work actually costs to deliver. Then look for discounts, unpriced extras, rework and a sales mix that keeps the team busy without leaving enough behind.
Do that before assuming the answer is more customers.
The pricing spreadsheet I had to simplify
While building Off Balance, I spent a fair bit of time working through services, packages and pricing.
One version of the pricing matrix became far too complicated. I asked AI to simplify it for me and make it easy to use in one tab.
That sounds like a spreadsheet issue. For me, it points to something bigger: I need to be able to explain what is included, what is not and when the scope changes.
A tidy price on a proposal is not enough if I have left the actual work open-ended.
The spreadsheet was only the starting point. The useful question was whether I could make the promise behind each price clear. Scope is not something I can leave until the work has already started.
I understand discounts a lot better now
When I was at Xero, I was selling a product I believed in.
And I’ll admit it, I was always pretty quick to use a discount if I thought it would help get the deal across the line.
I used to get pulled up on it.
At the time, I mostly saw the discount from the sales side.
The customer gets a better deal. The sale gets done. Everyone moves on.
Now that I own the business, I understand the other side of that decision a lot more clearly.
A discount does not just reduce revenue.
If the delivery effort stays the same, the discount comes straight out of the value the business keeps.
That means less money available to pay the owner, invest in the team, build a cash buffer or absorb the jobs that inevitably take longer than expected.
It has made me think differently about pricing.
The question is no longer just:
“Will this help me win the work?”
It is also:
“Is the work still worth winning at this price?”
A “small” discount can make a large difference
Here is an illustrative job, with all amounts excluding GST. The price is $10,000 and direct delivery costs are $6,000.
That leaves $4,000 gross profit, a 40% gross margin.
Give the customer a 10% discount without changing the work, and the price becomes $9,000. If delivery costs remain $6,000, gross profit falls to $3,000. Gross margin is now 33.3%.
The customer saved 10%. You gave up 25% of the gross profit.
To earn the original total gross profit at that lower profit per job, you would need about one-third more identical jobs. That assumes you have the capacity and do not incur extra overhead to deliver them.
This is not an argument that discounts are always wrong. It is an argument for making the trade-off deliberately.
A lower price in exchange for genuinely lower delivery cost, a narrower scope or something else valuable may be sensible.
Doing the same work for less because the conversation feels uncomfortable is a different decision.
Look for the work that never makes it onto the quote
The cost is not always a visible discount.
It might be the extra revision you never priced. Another site visit. Time spent fixing incomplete customer information. Work repeated because the handover was unclear. Your own evenings finishing something that the job budget no longer covers.
Review your last five completed jobs. Compare the quoted scope, final revenue and actual delivery time and costs.
Include the awkward bits, not just the productive hours you expected to spend.
For a service business, put a realistic value on the owner’s delivery time in this management review. Keep that separate from its accounting or tax treatment.
Otherwise, work can appear attractive simply because you have priced your own effort at zero.
Protect the promise, not just the price
Clear scope is not an excuse to be difficult. It is how you keep the promise you actually sold.
Describe the result, the deliverables, the assumptions and what the customer needs to provide.
Agree how additional work will be handled before it starts.
A useful line is:
“That sits outside the scope we agreed. I’ll price it separately, or we can swap it for something already included.”
There is room for generosity.
Just make it a conscious choice with a limit, not an invisible part of every job.
Then check the offer itself.
Could a better brief reduce rework?
Could you standardise a repeatable step?
Are you accepting jobs that are a poor fit for how the team works?
Cutting essential quality to rescue an underpriced job is not the plan I would choose.
Fix the next quote and the process that produced this one.
Are you winning more work, or getting better at giving your margin away?
Watch margin by type of work
An overall margin can hide the difference between work you should grow and work you should rethink.
Group similar services, jobs or customer types.
Compare them using a consistent method.
Do not confuse a valuable long-term customer with a single difficult job, but do not let a friendly relationship make the numbers untouchable either.
Choose one action:
Reprice a service.
Tighten one scope clause.
Fix a recurring cause of rework.
Or stop offering something that no longer makes sense.
Two margin questions
Is markup the same as margin?
No.
In the original example, $4,000 profit divided by the $6,000 delivery cost is a 66.7% markup.
The same $4,000 divided by the $10,000 selling price is a 40% margin.
Mixing them up can leave a quote below your intended profit level.
What is a good profit margin?
There is no useful single answer for every business.
Compare like with like and consider overhead, owner remuneration, risk and investment needs.
Gross profit is not the same as net profit or cash available to withdraw.
Keep more of the value you create
At Off Balance, Growth Advisor looks at the connection between pricing, delivery and the numbers.
We use that to choose practical changes and review what happened.
Bring one service or type of job that keeps you busy but never seems to pay properly. Let’s work out why.
