How to price your services.

Why the obvious calculation is wrong

The instinct is to take a salary you would be happy with — say $60,000 — divide by 2,080 working hours and arrive at about $29 an hour.

That figure assumes every hour is billable, that you never take holiday or fall ill, that the business has no costs, and that nobody withholds tax on your behalf. All four are false for self-employment. The honest rate is usually close to double the naive one.

Cost your actual availability

Work through it in this order:

1. Target income. What you need to take out of the business.
2. Business costs. Software, insurance, hardware, accountant, workspace.
3. Tax. Whatever proportion your jurisdiction takes, set aside as a rate.
4. Weeks actually worked. 52 minus holiday, illness and quiet spells — realistically 44 to 46.
5. Billable share. Sixty percent of a 40-hour week is a realistic target once proposals, invoicing, marketing and admin are counted.

The hourly rate calculator runs this and returns an hourly figure, a day rate and the amount you need to invoice monthly. For most people the result is uncomfortable and correct.

Hourly, fixed or value — and when each fits

Hourly

Honest and easy to explain, but it penalises you for getting faster and caps your income at your available hours. Best for genuinely open-ended work.

Fixed price

The right default for most defined projects. The client knows the total, and efficiency rewards you rather than costing you. It requires scope written down clearly enough that both sides can tell what is included — vagueness here is what turns fixed price into unpaid overtime.

Value-based

Pricing against the outcome rather than the effort. Powerful where the outcome is measurable and large — a system that saves a client $200,000 a year is not a $10,000 project because it took four weeks. It needs evidence and a client who will discuss their numbers.

Use the hourly figure as the internal floor either way: it tells you whether a fixed quote is worth accepting.

Charge for the whole job

Under-quoting usually comes from pricing the visible work and forgetting the rest. A "two-day" build is rarely two days once you include the kickoff call, revisions, the extra request that arrives on Friday, testing, handover, and the questions that come two weeks later.

Price the whole engagement. Define how many rounds of revision are included and what happens beyond them — not to punish anyone, but so that both sides know where the line is before it is crossed.

Raising prices without losing everyone

Raising prices feels risky and is usually less so than it looks. Even losing a fifth of your clients while raising prices 30% leaves you ahead on revenue and with more time. Run your own version of that sum with the profit margin calculator before deciding it is impossible.

• New clients first. Quote the new rate to everyone new. No conversation required, and it proves the market will bear it.
• Give existing clients notice. Thirty to sixty days, in writing, no lengthy justification. Prices change; it is normal.
• Do not apologise. A confident one-line notice is accepted far more often than a defensive paragraph.
• Expect some churn. The clients who leave over a modest increase are usually the ones consuming the most time for the least money.