Ask how a service business sets its prices and the honest answer is often: last year’s price, plus inflation, minus whatever the account manager needed to keep the client. Over a few years that habit quietly turns good contracts into loss-makers.
Last year plus inflation is not a pricing strategy
Costs don’t rise evenly. Supervision, mobilisation and travel grow faster on some contracts than others, so a uniform uplift leaves the most demanding clients underpriced and the easiest ones subsidising them.
Cost every contract
Contract-level profitability is rarely in the management accounts, but it can usually be built from them in a few weeks: direct labour, supervision, mobilisation and overhead, allocated honestly. The result is almost always a long tail of contracts that lose money.
Reprice at renewal, exit where you must
Renewal is the natural moment to correct a price. Most clients accept a reasoned increase; the few who don’t were usually the contracts you were paying to keep. A price floor for new bids stops the problem coming back.
The contracts you are paying to keep are rarely the ones you think.
From the work · PRV-016
Sample data
Gross margin ·
Facilities services provider
Before
31.5%
+4.7 pts
After
36.2%
Costing every contract exposed fourteen loss-makers; repricing and exits followed at renewal.
Source
Management accounts, H1 2024 vs H1 2025.
Illustrative sample data. Provan, its people, clients, figures and sources are fictional and shown for demonstration only.