The most common mistake: charging "whatever the shop next door charges"
Quick question: how did you land on the price for your haircut, your specialty bread, or your grooming service? If the answer is "I looked at what the competitor charges and matched it," you're not pricing — you're guessing.
Copying the competitor's price feels safe, but it ignores one crucial fact: you have no idea whether they're actually making a profit at that price. They might be losing money too — they just haven't noticed yet.
The math nobody does: cost + time + margin
Pricing correctly is simple in theory, it's just that almost nobody sits down to actually do the math. It has three parts:
- Direct cost — how much you spend on materials, ingredients or product to deliver that item or service
- Your time — how many minutes or hours you (or your employee) spend on that job, valuing your hourly work
- Margin — how much real profit is left after all of that, not what "feels" like profit
A lot of people only calculate the direct cost and forget their own time — as if the person's work were worth nothing. That's exactly how prices end up too low, and the business works hard for very little profit. Over months and years, that gap quietly adds up to a business that stays busy but never actually gets ahead.
A practical example: the price of a haircut
Let's use a simple haircut as an example:
- Products used (shampoo, gel, etc.): $2
- Professional's time: 30 minutes, at an hourly rate of $20 → $10
- Allocated overhead (rent, electricity, water divided by the month's appointments): $3
- Total cost: $15
If you charge $17 for the haircut, your margin is only $2 — barely anything, considering the risk of a no-show, a product going to waste, or a slower month. Charging $22 or $25 instead already covers those surprises and still leaves real profit at the end of the month.
The same logic applies to a specialty bread, a pizza, a manicure, or anything else you sell — the formula is always: cost + time + a margin that lets the business survive and grow.
How to keep this under control without it becoming a chore
Doing this math once doesn't fix it forever — material costs go up, rent gets adjusted, and your time becomes more valuable as you gain experience. Ideally, you'd revisit prices every few months using the same formula.
The problem is that, in the day-to-day rush of a small business, nobody has time to redo a spreadsheet every time. That's exactly where a system built for your business helps — automating this calculation, flagging when a cost goes up, and stopping you from still charging a price that no longer covers your bills.
SISO Digital builds custom systems for local businesses to organise prices, costs and margins without relying on spreadsheets or guesswork. Check out Custom Apps and Systems and stop working hard for very little profit.