3 Levers To Double Service Business Profits | Part 3

5 Apr 2026 · 1 min

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In this segment of the "3 Levers To Double Service Business Profits" series, Charles Leikauf emphasizes pricing as the most critical lever for service businesses. He introduces a three‑circle Venn diagram that intersects value created, cost + margin, and customer affordability; the overlap represents the optimal price. Leikauf illustrates a concrete cost breakdown: for a $100 client fee, roughly $66 covers firm administration and $33 covers direct labor (cost of sales). He argues that a business owner should aim for a 30‑50% take‑home profit. If that target isn’t met, he advises revisiting utilization rates and operational efficiency before adjusting pricing. When utilization, efficiency, and pricing align, the business can achieve the "perfect price" and maximize profitability.

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Now the third thing, the most important thing is pricing to me. When I think of pricing, there's the value you create, what is your cost plus margin, and then how much can the customer afford? That to me is like a Venn diagram with 3 circles. I'll draw one here poorly. The intersection between margin plus affordability and value, the middle of that is the perfect price. How do you know your cost plus margin? If you charge the client $100, 66 go to admin slash the firm, and 33 is cost of sales or cost of service. So staff. So this is direct labor. This is margin plus staff. So the, the idea is here is that the business owner can take home anywhere from 30 to 50% profit. If you're not hitting those numbers, we need to go back to utilization. Utilization good. Then we need to go back to efficiency. Are we getting this stuff done in time? And then we can look at pricing here. When you get all three of these together, this allows you to have the perfect price. This is the thought process that you would do.