Proper service pricing is critical for business
survival and growth. Without accurate pricing, you risk:
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Undercharging: Working
for free or losing money on every project
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⚠
Client flight: Pricing
too high and losing customers to competitors
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⚠
Burnout: Working excessive
hours to make ends meet
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⚠
Cash flow crisis: Unable to
cover fixed costs and business expenses
To properly price your services, follow this systematic approach:
Step 1: Calculate your business cost per hour
First, determine your hourly business cost by dividing your
total fixed monthly costs (rent, utilities, insurance, equipment, etc.) by your
working hours per month. This gives you your baseline cost per hour.
Step 2: Apply the pricing formula
Once you have your cost per hour, use this formula to
determine your service price:
Service Price = Total Cost ÷ (1 - Taxes - Commissions -
Payment Fees - Gross Margin)
Step 3: Market validation
After calculating your price, compare it with your local
market rates. If your calculated price is significantly higher or lower than market
standards, adjust accordingly while ensuring you still cover all costs and maintain
profitability.