How to price a service from your costs

A useful starting price covers the work required to deliver a service, including the time customers do not see. Build an estimate from your own costs, then test it against real enquiries and delivery experience.

Separate billable work from running the business

List the hours spent delivering the service and the time spent quoting, travelling, preparing, communicating and correcting work. Decide which costs belong to a single job and which support the whole business. Software, insurance and equipment can be annual costs; materials and subcontractors may vary by project.

Do not divide an annual income goal by every available working hour. Use the hours you realistically expect to bill after leave, administration and gaps between projects. The hourly rate calculator lets you compare those assumptions.

Build a worked estimate

For an illustrative project, 20 hours at 60 per hour is 1,200. Add 100 for materials and the base estimate is 1,300. A 10% contingency adds 130, giving 1,430 before any applicable tax. These are example figures, not recommended market rates.

Use the project estimate calculator to vary one assumption at a time. If preparation takes another three hours, show that change in the estimate instead of hiding it inside an unexplained total.

Do not confuse margin with markup

A service costing 40 and selling for 60 has a 50% markup on cost, but a 33.33% margin on the selling price. The denominators differ. If your target margin is 20%, a cost of 40 needs a price of 50, because 10 is 20% of 50.

Turn the number into a clear offer

Describe the deliverable, what the customer must provide, the number of revisions, timing and exclusions. After delivery, compare estimated time and costs with actual results. Use that evidence to improve the next quote. A calculator can explain a scenario; it cannot predict demand or guarantee profit.

Next: prepare a quote draft, or use connected business tools for managed records.