How to Figure Out What to Charge Clients as a Small Business or Freelancer
Pricing your product or service can feel like stepping onto a tightrope. Too high, and you risk scaring off customers. Too low, and you’re eating Pot Noodle for dinner (again).
Let’s walk through the process together and make sure you’re charging what you’re worth.
Step 1: Understand your costs (a.k.a. know what you’re spending)
Before you can decide on a price, you need to know what it costs you to deliver your product or service. Here’s what to factor in:
- Direct costs. These are the obvious ones, like materials, packaging, shipping, or software. For service-based businesses, this might be tools like subscriptions or platforms
- Overhead costs. Don’t forget things like rent, utilities, internet, and even keeping that printer you’ve had since your first year of uni running. All of these need to be covered by your pricing.
- Your time. This is the big one most people skip! Even if you love what you do, your time is valuable. Set an hourly rate you’d be happy to earn, and don’t forget to include it in your calculations.
Pro tip: Add up all these costs and divide by how many products or hours of service you expect to sell each month. This gives you a baseline for how much you need to charge just to break even.
Step 2: Research your market (a.k.a. spy on the competition)
Look around at what similar businesses are charging. Here’s how to approach this:
- For products: Check out competitors’ prices online or visit local shops to see what similar items go for
- For services: Browse websites or if you’re in any networking groups, ask around.
Also ask yourself:
- What makes what I’m offering different or better?
- Am I targeting a more budget-conscious crowd or premium clients?
You don’t have to match the competition exactly. Use their pricing as a guideline, but make adjustments based on your unique value.
Step 3: Think about value, not just cost
People aren’t just buying your product or service. They’re buying a solution, a feeling, or a transformation. Ask yourself:
- How does this product or service make my customer or client’s life better?
- What is it worth to them to solve this problem?
For example:
- A handmade leather bag isn’t just a bag, it’s a statement piece that lasts forever.
- A freelance graphic designer doesn’t just make logos, they create the face of a business, helping it attract customers.
If you can clearly communicate your value, people will be willing to pay more.
Step 4: Add your profit margin (because you’re not a charity)
Profit is what keeps your business growing. Here’s how to figure it out:
- For products, take your total costs and add a markup (usually 30%-50% or more, depending on your industry).
- For services, make sure your hourly or project rate includes not just your time but also some buffer for unexpected expenses or downtime when you’re not working.
Easy formulas:
Product price = Total costs + profit margin
Service price = Your desired hourly rate × estimated hours + buffer
Step 5: Test and tweak (and remember… it’s okay to adjust!)
Your first price might not be perfect, and that’s okay! Once you’ve set a price, pay attention to how your customers respond. Are they buying enthusiastically, or are you hearing objections? Adjust as needed.
Some signs you need to tweak your pricing:
- You’re constantly booked solid (you might be too cheap!)
- You’re struggling to land clients or sell products (you might be too pricey, or not communicating your value well enough).
- You’re covering costs but barely breaking even (time to raise prices!).
Step 6: Don’t be afraid to charge what you’re worth
If you don’t value your work, neither will your customers. Pricing isn’t just about maths, it’s about confidence. If you know your product or service is amazing, stand by your price. The right clients and customers will pay it.
Pro Tip: Offer tiers or packages to give customers options. For example, a basic, mid-range, and premium package can help you appeal to a broader audience while maximising profits.
Ultimately, remember that pricing isn’t about being the cheapest, it’s about offering the best value for the price. By understanding your costs, researching the market, and highlighting your unique value, you’ll find the sweet spot that works for you and your customers.
