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Business Basics: How do I price my services?

Do you own a service business? If so, you know that figuring out how to price services isn’t always easy.

To make sure your small business is profitable, use the following six steps to learn how to price a service:

CALCULATE YOUR COSTS (Cost based pricing)

Cost-based pricing is when businesses add up the costs that go into making a product or providing a service and mark up their prices from there.

As a service-based business, your costs are going to be a little different than that of a product-based business.

You can break down your costs into two categories – Fixed and Variable.

From a practical level - look at what your fixed costs are (costs you must pay regardless eg. Rent, Internet etc) and know what these are for an average month. If these are R5000 then you need to bring in R5000 of income to cover these... it's only AFTER that point that you are making any money for yourself - PROFIT.

Pro tip: Knowing your costs is just a starting point for service pricing. Remember that you must make at least your costs to reach your break-even point.

LOOK AT THE MARKET (Market – pricing)

Others will be doing similar work to you, what do they charge? It gives serve as a guide for you to ensure that you are competitive.

On its own, using market-based pricing generally isn’t sustainable. You shouldn’t base your pricing for services solely on what competitors are doing. But, be aware of what other companies charge so your prices aren’t completely off base.

Your competitors are playing in the same arena. Ignoring their strategies for pricing services doesn’t help you break the mold in your industry. Instead, it leaves you ignorant about what’s happening in your market. And, you need to know how the market is doing before setting a price that nobody can afford.

Pro tip: Keeping an eye on competitor pricing reveals what sets you apart. If you charge more than your competition, show customers the value of the unique experience your company offers.


Use a market study to collect information about your target customers. Find out how much your potential customers are willing to pay. Look at things like their needs, income, family status, occupation, etc.


Looking at your costs, competitors, and business value aren’t your only considerations when pricing services. The time you put into your business matters, too.

Think about how much time you invest in providing services. The longer you spend on a project, the more you should earn. Track how long it takes you to complete a project to help you come up with a fair price.

Also, consider how long you’ve been in the industry. The more time you have under your belt, the more value you add to your company and thus the offerings you provide. Generally, you can charge more as an experienced, trusted, and reputable individual in your industry.


Your profit margin is how much your business will bring in after subtracting the cost of goods sold (COGS). Coming up with a fair margin is key to turning a profit.

First, decide what percentage you want the profit margin to be. Profit margins generally vary by industry.

If you want to know how to determine pricing for a service, add together your total costs and multiply it by your desired profit margin percentage. Then, add that amount to your costs.

Pro tip: Consider your costs, the market, your perceived value, and time invested to come up with a fair profit margin.


You might consider charging customers by the project if you’re confident in the amount of time you think it’ll take you. Or, you might charge hourly if you don’t know how much time it takes you to perform the service.

KEY things to remember when you are a service-based business:

· People are buying your time and there is a finite amount of it available (ignoring any passive income channels you have).

· They are paying you for your experience and knowledge you have gained to get to the point where you can sell those services to them not just the time that they have with you time it takes to do the work

· You will not be for everyone - there will always be people who are cheaper and those who are more expensive - you won't be for everyone and that's OK.


Leave your questions or comments below and we will respond.

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Pricing is KEY to the success of your business. Without proper pricing your business could fail. Need assistance with your pricing? We are offering 1:1 consultations to answer all of your questions. Book now.

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