How to Price Your Services Without Guessing

Many small businesses set prices by checking what competitors charge and going a little lower. That can win work and still lose money. Pricing starts with knowing your own numbers.

Start with what you need to earn

Add up your monthly business costs: rent, phone, transport, tools, insurance and software. Add what you need to pay yourself. This is the total your work has to cover.

Work out your real billable hours

You can't bill every hour. Travel, quoting, buying materials and admin all take time. If you work 160 hours a month, perhaps only 100 can be charged to clients.

Divide your monthly target by billable hours, and you have a minimum hourly rate.

Say you need 150,000 a month and can bill 100 hours. Your minimum is 1,500 per hour, before any profit.

Add materials and profit

For each job, add the following:

1. Labour at your rate.
2. Materials and other direct costs.
3. A margin for waste and surprises.
4. Profit for the business.

Profit isn't greed. It pays for slow months, new tools and growth.

Check against the market

Now compare with others. If you're far above them, ask what extra value you offer. If you're far below, you may be underpricing, and very low prices can even make clients doubt your quality.

Review regularly

Costs rise slowly and quietly. Review your prices at least once a year, and look at past jobs. Did you make what you expected? Your actual results are the best guide to your next price.

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