Underpricing is the most common mistake for freelancers and small service businesses. A clear method helps.
Direct answer
To price your services, work out the income you need, divide by the hours you can realistically bill to get a minimum hourly rate, check what the market pays, and then price by the value you deliver. Use hourly pricing for open-ended work, and project prices when the scope is clear and the result is valuable.
Find your minimum rate
- Annual income you want
- Plus business costs and tax
- Divided by billable hours per year
Billable hours are fewer than working hours, because admin, marketing and holidays aren't billable. If you can bill 20 hours a week for 46 weeks, that's 920 hours.
Hourly vs project
| Hourly | Per project | |
|---|---|---|
| Good for | Unclear scope, ongoing support | Clear deliverables |
| Risk | Rewards slowness, clients watch hours | Underestimating the work |
| Tip | Track time honestly | Define scope and revisions in writing |
Pricing by value
Ask what the result is worth to the client. A logo for a one-person start-up and for a national company are different jobs, even if the hours are the same.
Packages
Offer three options: basic, standard, premium. Describe each clearly.
Protect yourself
- Written scope and number of revisions
- Deposit before starting
- Clear payment terms
Raising prices
- Raise rates for new clients first.
- Give existing clients notice.
- Don't over-explain.
Related
How to price a product and pricing strategies for small business. Negotiating with clients? See negotiation skills for beginners.
Where Teyro fits
Teyro's How to Price a Product or Service course covers your real costs and margins, setting a price from the value you deliver, designing options and testing and raising prices. It is free to start.
The bottom line
Know your minimum, price by value and put terms in writing.
