Published September 18, 2026 · Altvina Insights · 5 min read

Pricing for Margin, Not for Comparison

Most service pricing gets set by looking sideways at competitors, which imports their cost base into your business. A ten-minute worksheet sets your floor from your own fixed costs, owner pay and the hours you actually bill.

Open a competitor's pricing page, look at the day rate, and set yours a little under it. A lot of service pricing gets decided that way. It is a quick way to inherit somebody else's cost base without ever seeing their books.

The two failure modes look like opposites. One firm prices under the market and calls the extra volume a win. Another sits near the top of the range and braces at every renewal for the client who pushes back. Both are looking outward for an answer only their own numbers can give.

Market rate answers a question you did not ask

A competitor's rate comes out of their fixed costs, their staffing mix, how much of their team's time gets billed, and how they feel about thin months. None of that shows up on your bank statement.

The market rate tells you roughly what buyers in your category are used to paying. It cannot tell you whether your business survives at that number. Those are different questions, and only one of them is answered with arithmetic.

So here is the worksheet: four inputs and one division. A bank statement and a quarter of timesheets is enough to run it in ten minutes.

The four numbers to put in

1. Fixed cost, every month

Everything that gets paid whether or not a new project lands this month. Rent, insurance, software seats, accounting, phones, subscriptions you forgot you renewed, and any salary or retainer that is committed rather than project-funded. Pull three months and average them, so one annual invoice does not distort the picture.

2. The owner pay the business has to sustain

Not what you would like to take. The figure below which you are quietly funding the company out of your own savings or your own weekends.

If you have been taking whatever is left over, write down what the household actually needs and use that instead. A business that cannot pay its owner is not cheap. It is subsidized.

3. Realistic billable hours per month

Most of the error lives in this line. Not hours available, and not hours sold. Hours that were worked on client delivery, then invoiced, then collected.

Sales calls, proposals, rework, the unbilled half hour on a Friday afternoon, holidays, sick kids: none of that belongs here.

4. Your current realized rate

Revenue collected last quarter, divided by the hours that went into delivering it. Not your list price. The realized rate is usually lower than the quoted one, and the gap between the two is its own small piece of information.

The division, and the gap

Fixed cost plus owner pay, divided by realistic billable hours. Call the result your floor.

Anything below the floor is being funded by something. Name it: retained profit, a credit line, unpaid overtime, or optimism. Then subtract. Floor minus realized rate, multiplied by your billable hours, is the monthly hole in plain money. Ten minutes of arithmetic turns a vague worry into a number.

Why the hours line breaks first

Our bias, stated as a bias: the price line gets argued over and the hours line gets guessed. Guess the hours high and the floor lands low. No amount of competitor research catches that error, because it lives in your own records.

The distance between hours a person was available and hours that were invoiced and collected is usually wider than an owner expects. Pull that line from timesheets and invoices rather than memory, even when the records are scrappy.

A wage is not the cost of an hour

One input people underestimate is what delivery labor really costs. Small businesses pay employees an average of $30.42 an hour, equivalent to about $63,000 a year, according to small business figures published by the US Chamber of Commerce.

The wage is not the cost of an hour you can invoice. Add payroll taxes, benefits, tools, and the time that is real work but not billable, and a delivered hour costs well above the wage. We will not give you a multiplier, because yours is knowable. Take what a person costs you per month and divide by the hours of theirs you actually billed last quarter. That is the real number.

What the answer is, and what it is not

The floor is a constraint, not a price. It marks what you cannot go below without someone covering the difference. What the work is worth is a separate conversation about outcomes and demand, and the floor has nothing to say about it.

The floor also will not tell you whether you are cheap or expensive for your industry. Benchmark averages blend firms with different cost structures, different delivery models, and different definitions of a billable hour. Your own arithmetic covers less ground and is far more reliable.

Four exits, and the cheapest one

There are four honest exits. Raise the rate. Raise the share of hours that get billed. Cut fixed cost. Or change the shape of what you sell so it is no longer priced by the hour.

Our opinion: the second one is usually the cheapest to fix and the last one anybody looks at. Raising a rate is a conversation with every client. Recovering a few hours a month that leak into scope creep, rework, and unbilled admin is a conversation with yourself, and it often closes a surprising share of the gap. We would look there before writing the price increase email.

Run it before Q4 planning

A rate set now is usually still the rate next summer, because rate changes are easy to postpone. Before you plan Q4 on a number picked by comparison, spend the ten minutes and get a floor from your own accounts. Worst case, you learn you are fine and stop wondering.

Sometimes the gap is structural rather than a pricing decision. The work itself costs more to deliver than the way you sell it can support. That is a different problem, and a bigger one. A fit call is where we work out whether it is one we are the right people for. It is qualification, not free consulting, and we will say so when the answer is no.

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