When it comes to pricing your services, it’s natural to look around and ask peers what they charge. While this can be helpful context, basing your rates solely on what others do misses crucial parts of the equation.
To set a price that sustains your business and lifestyle, you’ll need to dig into four key factors: your costs, your time, your personal income needs, and market expectations. Here’s how each one plays a role.
1. Understand Your Costs to Operate
The first step is knowing your business costs inside and out. Ask yourself: What does it actually cost to provide my service? For example, do you need contractors to complete certain projects? Are there software or tools that you only use to deliver client services?
This isn’t just about the project-related costs. It also includes operating expenses—everything from office supplies to professional licenses to software subscriptions. Having a clear view of these costs gives you the answer to two important questions: "Where is my money going?" and "How much do I need to make to stay in business?"
2. Factor in Your Time
Time is a finite resource, especially for solo providers or those with lean teams. Pricing low may seem like a competitive edge at first, but as your workload increases, you’ll realize that there’s simply not enough time to deliver. This can quickly lead to burnout and force price increases.
Take a clear look at each service offering and the time required to meet your clients’ expectations. If delivering high-quality work means you can only handle ten clients at a time instead of fifty, your pricing will need to reflect this limit. Consider your time as part of the value you bring—it’s crucial to your sustainability.
3. Account for Personal Income Needs
You have bills to pay and a life to live, so paying yourself isn’t optional. Knowing your own financial needs is essential in setting your prices. Start by getting clear on how much you need to make to cover both your personal expenses and future savings.
This number may feel like a lofty goal, especially at first, but it’s also an essential one. Avoiding this step can mean under-pricing yourself, which will make sustaining a business incredibly difficult over time. You need to know what it costs for you to live well so you can confidently price your services.
4. Gauge Market Demand
After you’ve considered your costs, time, and income needs, look at what the market will bear. Even if you offer tremendous value, what’s affordable to some clients may be a luxury to others. Some people will stretch their budget to work with you, while others have plenty to invest.
To get a feel for the pricing landscape, look at both high and low ends of the pricing spectrum within your field. This will help you refine where you fit and establish a starting point for your rates.
Fine-Tuning Your Pricing
Once you’ve established a price that feels right, it’s worth asking a few extra questions:
What am I willing to include in my service?
What would I absolutely charge more for?
How easily can I onboard new clients at this price?
How long will each client relationship likely last?
Will the price vary based on specific client needs or will it be the same for everyone?
Finally, consider the type of work you’re doing. Are you taking on tasks you don’t enjoy just to meet income goals? While you may need to do this initially, it can also become the next area to cut or charge more for when you’re in a position to do so.
Pricing isn’t just about numbers. It’s about creating a balance between your business goals, personal needs, and the market’s willingness to pay. By using these four pillars, you can set prices that support a sustainable, profitable business and a fulfilling life.
Check out the "Pricing With Purpose" Build to Enough Podcast episode for more tips and insights.