For many SMEs, improving profitability doesn’t require more customers — it requires better pricing. Yet pricing is often one of the least structured parts of a small business. Many owner-managed businesses rely on historic rates, gut feel, or “what we’ve always charged”, without a clear pricing strategy or visibility of gross margin.
This article explains how SMEs can price for profit, increase gross margin, and create a scalable commercial model based on our work supporting UK businesses.
Why Pricing Is One of the Biggest Barriers to SME Profitability
Our work with SMEs shows consistent themes:
- Many do not have a defined pricing strategy
- Gross margin is not monitored at quote level
- True direct costs are unclear
- Pricing varies depending on who prepares the quote
- Undercharging occurs quietly, job by job
- Manual quoting slows down sales and weakens the customer experience
When pricing isn’t intentional, profit isn’t intentional either. And without clear gross margin targets, SMEs often make far less money than they should.
If you’ve ever wondered, “How do I increase my gross margin?”, “Are we charging enough?”, or “Why are our profits not improving despite strong sales?” — pricing is usually the answer.
How Undercharging Happens — and Why SMEs Don’t Notice It
Undercharging doesn’t feel like a decision. It feels like:
- wanting to remain competitive
- assuming customers won’t pay more
- using old price lists
- guessing the margin rather than calculating it
- missing items in manual quotes
- lacking confidence in pricing conversations
But without visibility of cost and margin, it’s impossible to know whether a job is profitable.
A structured pricing model turns uncertainty into clarity.
The Solution: A Margin-Driven Pricing Strategy
To price for profit, SMEs need to adopt a margin-first approach:
1. Understand The True Cost Of Delivering Each Job
This includes all direct costs including materials, direct labour/services, sales fees etc.
2. Set A Clear Gross Margin Target For Every Service
Margin should be deliberate. Not accidental.
3. Make Margin Visible On Every Quote
The most effective tool we implement is a simple margin indicator (red/amber/green).
If the quote isn’t green, the price isn’t right.
4. Standardise Pricing Across The Business
This avoids inconsistency and protects margin.
5. Automate The Quoting Process
A pricing calculator or quote-building tool:
- reduces errors
- speeds up response times
- improves professionalism
- empowers staff to price confidently
- strengthens your ability to hold your price
Customers trust suppliers who respond quickly with a clear, professional quote — and this trust significantly reduces price resistance.
Why Faster Quotes Lead to Higher Win Rates
SMEs often overlook the commercial impact of speed. When a prospect receives a quote:
- within minutes of an enquiry or site visit
- with clear pricing
- with a professional layout
- from a supplier who clearly knows their business
…they are far more likely to say yes.
Fast, accurate quoting is one of the most powerful ways to increase conversion rates without discounting.
This is why a pricing calculator is one of the most valuable tools a growing SME can implement.
The Commercial Impact: Higher Gross Margin Without Extra Work
A deliberate pricing strategy can transform profitability:
- Higher gross margin
- More predictable profit
- Stronger cash flow
- Fewer underpriced jobs
- Greater confidence in charging what your service is worth
- A more scalable commercial model
- Increased business valuation
Many SMEs improve profit significantly without winning any additional work — simply by pricing existing work correctly.
How to Know If Your SME Needs a Pricing Review
Ask yourself:
- Do we consistently hit our gross margin targets?
- Do we even have clear gross margin targets?
- Can anyone in the team build a profit-checked quote?
- Are quotes sent quickly enough?
- Do we understand our true direct and overhead costs?
- Are we confident our prices reflect the value we deliver?
- Do we regularly review margin achieved by customer or service?
If not, there is almost certainly profit being lost.
Final Thought: Pricing for Profit Is One of the Fastest Ways SMEs Can Increase Profitability
Improving pricing is not about charging “as much as possible”. It is about:
- knowing your costs
- setting the right margin
- pricing consistently
- quoting professionally and quickly
- Delivering product / services that justifies the price
- giving your team the tools to achieve your price in the face of customer negotiation
- having a referral process for approving quotes below target margin
SMEs that adopt a disciplined, margin-driven pricing strategy will experience significant improvements in profitability, confidence and commercial resilience.
At Secantor, we help SMEs build pricing systems that make profitability deliberate — not accidental.
Read our Pricing for Profit case study to discover how Secantor helped one of its clients improve gross profit margin from 25% - 35%.
What Is Gross Profit & Why Is It Important In Business?
Business Essentials: Improving Profitability
