How to price your services without undercharging

1. Work out your floor: the real cost of an hour

Before thinking about what you could charge, you need to know the figure below which you lose money. Two numbers are enough: what it costs to keep the business open for a month and the hours you actually bill. Amounts are in your own currency.

The mistake is almost always in the second-to-last line. Nobody bills a hundred percent of their day. In appointment-based work, billing 55 to 70 % of hours is normal. If you calculate with 160, your price comes out 40 % lower than you need.

On top of that floor, add the direct cost of each service —materials, products, travel— and sales tax or VAT if your business charges it. The result is the price below which every new client makes you poorer.

2. From cost to value

The floor tells you the minimum. It does not tell you what to charge. The client does not care about your rent: they pay for what they get. That lets you charge differently for the same time.

• Specialization. "Physical therapy" competes with everyone. "Knee rehab for runners" competes with almost no one, and pays better.
• Outcome rather than time. "60-minute session" invites comparison by the minute. "Eight-week plan to get back to training" is compared on the result.
• Urgency and availability. The same service is worth more on a Saturday or the same afternoon.
• Risk you remove. Guarantee, fixed price, follow-up included: peace of mind is worth paying for.
• Experience. Punctuality, service, easy booking and payment. It shows in what clients will pay and whether they come back.

The useful question is: what does it cost the client not to solve this? An injury that keeps them off work, a website that brings no customers or a wedding without decent photos cost far more than your fee. Your price sits between your floor and that cost.

3. The competition, as a check

Now look at what others charge. Not to copy, but to see where you stand. Find five similar businesses in your area and note the price of their main service.

• If you are below all of them, either your costs are much lower or you are getting it wrong. It is usually the second.
• If you are in the middle, you need a clear reason to be chosen, because price does not give you one.
• If you are above, that reason must be visible on your website before people reach the price: specialty, reviews, results.

Competing on being cheapest only works if your costs are the lowest, and even then someone always turns up willing to lose more money than you. For an independent professional it is the worst position to be in.

4. The shape of the price: session, package, membership or project

A package discount should be real but small: 5 to 15 % is usually enough, because the client is buying convenience and commitment. Discounts of 30 % teach them that your normal price is inflated.

How to combine these formats with products and content is covered in how to sell online.

5. How to present the price

The same price feels expensive or reasonable depending on how it is shown.

• Three options. A basic one, a recommended one and a premium one. The premium makes the middle one look sensible, and some people take it.
• Mark the recommended one. People like being told which one others usually choose.
• Say what is included before saying what it costs. Price at the end of the description, not the start.
• A fixed price rather than "from", whenever you can. If you cannot, give an honest range.
• Show the total the consumer pays. In the EU, prices to consumers must include VAT; in the US, make sure taxes and fees are clear before checkout.
• Publish it. Hiding the price does not filter out tire-kickers: it filters out people in a hurry with a budget.

6. How to raise prices without losing clients

Raising prices is nerve-racking and almost always goes better than feared. Costs go up every year; if your price does not, you are charging less every year.

1. Raise it for new clients first. It is painless: they never knew the old price.
2. Give current clients a month's notice, in writing and without apologizing. One sentence is enough.
3. Offer a bridge: anyone who buys a package before the date gets the old price. You get paid in advance and soften the change.
4. Once a year, on a fixed date. A small, predictable increase is accepted more easily than a big one every five years.
5. Accept that some will leave. If you raise prices 10 % and lose fewer than 10 % of clients, you earn more for less work.

7. Discounts: when they make sense

A discount is a tool, not a habit. Used all the time, it becomes your real price.

• Yes: in exchange for something —paying upfront, quiet hours, bringing another person.
• Yes: with an end date and a reason, such as a launch.
• No: because a client haggles. Someone who gets a discount by haggling will haggle again.
• No: to fill the schedule permanently. If there are always gaps, the problem is finding clients or the offer itself.
• Better than a discount: add value. A follow-up included or an extra costs less than 20 % off and leaves your rate untouched.

8. Expensive mistakes

• Calculating with hours worked instead of hours billed.
• Forgetting taxes and insurance. What you take in is not what you earn.
• Not charging for last-minute cancellations. That slot cannot be sold again.
• Keeping the same price for three years.
• Giving away the "while I'm here". Unquoted extras eat half the margin in trades and renovations.
• Quoting by message without context. A bare number always looks expensive.

The full cost calculation when starting out, with taxes and insurance, is in how to start a business.