How Kenyan Service Businesses Should Price Their Work and Stop Undercharging

Overview

By the Kevlar Bosuben Advisory team. Last reviewed 19 October 2026. Reading time: 9 Mins Most service owners in Nairobi set prices the same way. They look at what the business down the road charges, shave a little off to win customers and hope the numbers work out at month end. Sometimes they do. Often the till is busy while the owner still cannot pay herself properly. Weak pricing is not the only reason small businesses close. A 2016 survey by the Kenya National Bureau of Statistics found that about 400,000 micro, small and medium enterprises failed to reach a second anniversary across the five years it covered, according to The Standard's report on the findings.

The detail

The survey also recorded many other pressures, from access to credit to seasonal swings in demand. Price still stands out as the one lever an owner can change this week without borrowing a shilling. This guide gives you a method you can run on one sheet of paper. It covers the lowest price you can afford to charge, how taxes and M-Pesa fees change that number, and how to move your prices up without losing the customers you want. A fully worked example follows, built on a hypothetical Nairobi salon. ## Why small price changes carry so much weight A well known 1992 Harvard Business Review study by Michael Marn and Robert Rosiello of McKinsey & Company looked at large companies and found that a 1% improvement in price lifted operating profit by about 11% on average. A 1% improvement in variable costs lifted it by about 7.8% and a 1% improvement in fixed costs by about 2.3%. Those numbers come from big corporations so they will not transfer exactly to a barbershop in Kasarani. The direction does transfer. When most of your costs are fixed, rent and salaries do not shrink when you charge more, so almost every extra shilling of price lands in profit. ## The three prices every service has Every service has three prices. The floor is the lowest price that covers your real costs and taxes.

What it means for you

The ceiling is what your customer would pay for their best alternative, counting their time and risk. The target sits between the two and depends on how clearly customers can see the value you deliver. Most owners have never calculated their floor. They guess it. We start there because the other two prices mean little until the floor is known. ## Step 1: Add up your real monthly costs List everything you pay in a normal month: rent, power and water, licences and permits, airtime and marketing, equipment repairs and replacement, staff salaries and materials. Then add one line that most owners leave out, which is pay for yourself. If you work in the business, your time has a cost even when you never write yourself a cheque. Enter the salary you would accept to do the same job for someone else. If the business cannot carry that number, you have found a pricing problem and not a personal failing. Separate costs into two groups. Fixed costs stay the same whether you serve ten customers or a hundred. Variable costs, such as materials for each job, rise with every customer served. ## Step 2: Count your billable hours honestly A stylist at work for eight hours is not selling eight hours. Waiting for customers, cleaning, restocking, late arrivals and no shows all consume paid time. Track a normal month and record how many hours were actually spent on paying work. Divide billable hours by paid hours to get your utilisation rate. The example below assumes 60%, which you should replace with your own figure. Then divide your total fixed costs by your billable hours. The result is the fixed cost every billable hour must earn before the business makes a cent of profit.

Frequently asked questions

Who wrote this article?

It was written by the Kevlar Bosuben Ventures advisory team in Nairobi, Kenya, based on live client work.

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We revisit articles whenever the underlying market data or regulation changes, and the update date is shown above.

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About Kevlar Bosuben Ventures

Kevlar Bosuben Ventures is a Nairobi based business and financial advisory team. Advisory, coaching and education only. We do not hold client funds or earn product commissions. Contact +254 708 074 285 or kevlarbosubenventures@gmail.com.