How Much Should I Charge? How to Price Your Services From Your Real Costs

A lot of people ask me how much they should charge. It's one of the most common questions I get from service business owners, and most of them are hoping I'll just give them a number.

The real way to answer it is to understand the basis.

What are your expenses? How much do you want to make? How much does it actually cost you to run the business you're running? Because if you're losing money on every client, there's no sense in being in business.

Why most owners price by guessing

Most service businesses set their prices by looking around. They check what competitors charge, pick something close, maybe go a little lower to win the business, and hope it works out.

The problem is that your competitor's price is based on their costs, their schedule and their goals, not yours. Copying it tells you nothing about whether your business is making money.

If you think you're worth it, you are. But you have to have a basis for it, meaning you know what your time and effort actually cost. Having that basis gives you a lot more confidence in what you're asking people to pay.

How to find your minimum price

Walk through your numbers from top to bottom, for one month.

Add all of that up, and you have the total your business has to bring in each month.

Then figure out how many sessions or jobs you can actually do in a week. Not the maximum, the real number, with cancellations, slow weeks and life. Multiply that by four, then divide your monthly total by it.

That's your minimum price per session or job. Below it, the business doesn't make sense.

What it looks like with real numbers

Here's the example I use when I teach this to massage therapists, but the math works the same for any service business.

Say you need $4,000 a month to take home. Add $1,000 for taxes, $700 for your space, $150 for supplies, $100 for insurance, licenses and training, $150 for software, and nothing for travel. That's $6,100 your business has to bring in every month.

Now say you can realistically do 17 sessions a week, which for most people is a full book. That's 68 sessions a month. $6,100 divided by 68 is about $90.

So $90 is the minimum. If you're charging $75, you're losing money on every session, no matter how busy you are.

Are you making or losing money on each service?

Once you know your minimum, put it next to what you charge today for each service.

Some services may be well above it. Others may be below it, which means you're working hard to lose money. Many owners discover that their most popular service is the one costing them, because it was priced to win clients instead of to support the business.

That doesn't always mean you have to raise the price immediately. It might mean adjusting what's included, packaging it differently, or pointing clients toward services that pay you properly. But you can't make any of those decisions until you know the number.

"Nobody's going to pay that"

This is the fear that keeps owners underpriced. Don't assume a higher price won't sell.

Ask Apple how that worked out for them. The expensive price sells to the person it's for, and that's the person you should be building your business around. When you know exactly who you serve and what problem you solve for them, a fair price is much easier to say with a straight face.

Turn your price into an offer

An offer isn't a menu. It's one thing, for one person, at a price that clears your minimum.

Take the service you're best known for, describe it the way your ideal client would, and put a price on it that's at or above your minimum. That's an offer you can stand behind.

Frequently asked questions