How to Price Your Services as a New Business

Most new service businesses price by looking at a competitor's website, subtracting a bit because they feel new, and hoping nobody asks how they arrived at the number. That works right up until you land three clients and realise the work pays you less than a shift job, with none of the security.

Here is the plain answer. Your price has a floor and a ceiling. The floor is arithmetic: what it costs you to deliver the work, including the hours you cannot bill, the tools, the fees, and the tax you will owe. The ceiling is what the outcome is worth to the buyer. You set your list price somewhere in that gap, publish it, and adjust it based on what happens in your first ten sales conversations. Everything below is how to do each of those parts.

Start with your minimum viable price, not the market

You cannot know whether $500 is too cheap until you know what $500 costs you. So do the arithmetic first.

There are two numbers you need: your annual cost of being in business, and the hours you can actually sell.

Annual cost of being in business. Add up everything you will pay whether or not a client shows up, then everything you pay per project:

The ranges above are what we commonly see for a one-person service business with no premises. Yours will differ. The tax number in particular depends entirely on where you are and how you are set up, and it is the one people get badly wrong — check it with an accountant in your jurisdiction rather than guessing from a blog. Our breakdown of what it actually costs to start a business covers the setup side of this in more detail.

Billable hours. This is where the second mistake happens. A full-time solo operator has roughly 2,000 working hours in a year after holidays. You will not sell 2,000 of them. Sales calls, proposals, invoicing, marketing, admin and rework are unpaid. Most solo service businesses bill between 50% and 65% of their working hours, and in year one it is often lower than that because you are spending so much time finding work at all.

So assume 1,000 to 1,300 billable hours a year, not 2,000.

The calculation

Take a hypothetical freelance bookkeeper:

• Personal pay needed: $55,000
• Fixed business costs: $4,800/year (software, insurance, accounting)
• Tax set-aside at 30%: roughly $25,600 on top
• Total to cover: $85,400
• Billable hours: 1,100

$85,400 ÷ 1,100 = $78/hour. That is the floor. Not the price — the floor. Below it, the business is losing money while looking busy.

Now add margin. If you want a genuine profit buffer for slow months, equipment and reinvestment, add 20–30%. That takes the internal rate to roughly $95–$100/hour.

Do this calculation before anything else. It changes how every later decision feels, because you stop negotiating against an imaginary number and start negotiating against a real one.

Then find the ceiling: what the outcome is worth

The floor tells you what you must charge. It tells you nothing about what you can charge. That comes from the buyer's side of the equation.

Ask what the work is worth to them in money, time or risk avoided:

• A bookkeeper who prevents a $3,000 tax penalty and saves the owner six hours a month is not selling six hours.
• A web developer who rebuilds a checkout that leaks orders is selling recovered revenue.
• A cleaner who lets a landlord turn a unit around in one day instead of three is selling rent days.

You are not going to capture all of that value, and you should not try to on your first ten clients. But it tells you which direction to move. If the outcome is worth $4,000 to the buyer and your floor says the work costs you $900, you have a lot of room. If the outcome is worth $400 and your floor is $900, you have the wrong service, the wrong customer, or a delivery process that needs to get much faster.

That last case is the important one. Pricing cannot rescue a service where the cost of delivery is close to the value delivered. If your arithmetic keeps landing there, the problem is upstream — go back and check the model itself.

Choose a pricing unit

The unit you bill in shapes the whole relationship. Pick deliberately.

For a new business, fixed-fee projects and packages beat hourly nearly every time. Two reasons. First, they let you profit from getting better — the job that took twelve hours in month one takes seven in month six, and the price does not fall. Second, they move the conversation from "what is your rate" to "what does this cost", which is the conversation you want.

The catch is that fixed pricing requires you to know your delivery time. If you genuinely do not, price your first two or three jobs hourly, track the hours honestly, and convert to fixed fees once you have data. That is a fine way to start. Just do not stay there by default.

Build three offers, not one

One price is a wall: the buyer either clears it or leaves. Three offers give people a way in and a way up.

1. The entry offer

Something small that solves one problem quickly and completely. An audit, a setup, a single deliverable, a diagnostic session. Priced so that a cautious buyer can say yes without a committee.

For most solo service businesses this lands somewhere between $150 and $750. It should take you a few hours to a day, not a week. Its purpose is to convert strangers into clients, and to let you evaluate whether you want to work with them before committing to a month of it.

Two rules. It must stand on its own — a buyer who never buys anything else should still feel well served. And it must not be free. A free audit attracts people who want free audits; a $250 audit attracts people with a $250 problem.

2. The core package

This is the offer most people should choose. It bundles the complete, common solution to the problem you solve. Name it after the outcome, not the deliverables.

Price it from your floor calculation. If your internal rate is $95/hour and the package takes 18 hours of real delivery plus 3 hours of coordination, that is 21 hours — roughly $2,000. Round it to a clean number and check it against the value ceiling.

3. Upgrades, not a bigger base

Here is where new businesses lose money. When a buyer asks for something extra, the reflex is to include it so the deal closes. Do that five times and your core package quietly becomes a bespoke project priced as a standard one.

Instead, keep the base tight and sell the extras as named, priced add-ons: rush turnaround, extra revision rounds, additional locations or channels, training for the client's team, ongoing support after handover. Each one has a price on a list you can hand over.

A rough shape for a hypothetical brand designer:

Those numbers are illustrative. The structure is what transfers.

Publish your prices, or at least your starting price

The most common objection to publishing prices is "my work varies too much". It varies for everyone. Publish anyway.

Reasons to publish:

• It filters. Buyers who were never going to pay $2,800 do not book a call, and you get your Tuesday back.
• It closes faster. Buyers arrive pre-qualified and the call becomes about fit, not sticker shock.
• It builds trust. Hidden pricing reads as "we charge what we think you can afford", because sometimes that is what it means.
• It gets you found. Both search engines and AI assistants answering "how much does X cost" need an actual number to cite.

If your work is genuinely variable, publish one of these instead of a flat price:

1. "From $X" — your realistic minimum for the core package, not your cheapest ever job.
2. A worked example — "A typical five-page site for a local trade business runs $3,000–$4,500 and takes four weeks."
3. A range with the driver named — "$2,000–$6,000 depending on number of locations."

What not to publish: a price you do not want to sell at. If "from $900" gets you twelve enquiries from people who will only ever pay $900, the number did its job — badly. Publish the price you want more of.

This matters more when you have no audience yet, because the price page does qualification work that a referral would otherwise do. If you are still at the stage of finding anyone at all, pair this with getting your first customers with no audience.

Set scope boundaries before you need them

Most pricing pain is not pricing pain. It is scope pain wearing a pricing costume. The price was fine; the job took three times as long as quoted.

Every offer needs these five boundaries written down, in the proposal and on the page:

1. Revisions. How many rounds are included, and what a "round" means. Two rounds of consolidated feedback is standard for creative work. Beyond that, an hourly rate or a fixed per-round fee applies.
2. Turnaround. How long delivery takes from the point you have everything you need — and what happens to the timeline when you do not.
3. Communication. Which channel, which hours, and expected response time. "Email, weekdays, replies within one business day" prevents a lot of 9pm messages.
4. What is not included. The three or four things buyers most often assume are in the price. Say them out loud. Hosting, stock photography, printing, ad spend, copywriting, ongoing maintenance.
5. Payment terms. Deposit percentage, when the balance is due, what late payment costs. Take 50% up front for projects and bill retainers in advance. A new business cannot afford to finance its clients' cash flow.

Write these once and reuse them. If you find yourself renegotiating the same boundary in every project, it belongs in your standard terms — which is exactly the sort of thing worth turning into a written SOP so it happens the same way every time.

If you want the fill-in versions of all this — the cost calculator laid out line by line, the tier template, the scope boundary wording you can paste into a proposal, and the exact scripts for the four objections you will hear most — that is what The Service Pricing Guide is. It is $10 and it is the doing of what this article describes.

What to say when they push back on price

You will hear four objections. Here is how each one is actually handled.

"That's more than I expected." Ask what they expected and what they were comparing it to. Often they are comparing your core package to someone else's entry offer. Sometimes they have a real budget of $800 — in which case sell them your entry offer, deliver it well, and let the relationship grow.

"Can you do it for less?" Yes — for less scope. "I can get you to $1,900 by dropping the second location and moving to one revision round." Never drop the number while keeping the work. The first discount teaches the buyer that your prices are opening bids, and every future project with them starts from that lesson.

"The last person charged half that." Ask how it went. Usually you are hearing why they are now shopping. If the previous supplier genuinely did the same work for half, you are competing on price with someone faster or cheaper to run than you, and you need a different buyer, not a lower number.

Silence. No objection at all, three or four times in a row, is not a win. It means you are underpriced. Raise it.

The uncomfortable truth is that some percentage of buyers should say no. If your close rate on qualified leads is above roughly 80%, your price is too low. Somewhere in the 30–50% band is healthy for most service businesses — high enough that you are not wasting your life on proposals, low enough that you are not leaving money on the table.

Review every 5–10 sales conversations

Pricing is not a decision you make once. It is a loop you run.

After every batch of five to ten sales conversations, sit down with three numbers and one list:

The most common finding in that first review is not that the price was wrong. It is that the delivery took 40% longer than assumed, which made a fine price into a bad one. Track your hours for the first ten jobs even after you switch to fixed fees. You cannot fix what you have not measured.

Raise prices on new clients first, not existing ones. It is lower risk and it gives you evidence before you have the harder conversation. When you do raise for existing clients, give 30 days' notice, do it in writing, and do not apologise for it.

Mistakes that cost real money

• Pricing off competitors alone. You do not know their costs, their volume, their subcontractors, or whether they are profitable. Half the businesses you are copying are underpriced too.
• Forgetting tax. A $2,000 project is not $2,000 of income. Set the tax aside the day the payment lands, in a separate account.
• Discounting to win the first client. The first client sets your reference price and refers people like themselves. A cheap first client sends you cheap second and third clients.
• Free work "for the portfolio". If you must do reduced-price work to build examples, price it normally and apply a named, time-limited founding-client discount so the anchor stays where you want it.
• One price, no ladder. Without an entry offer, every "not right now" is a total loss instead of a $350 relationship.
• Quoting from feel. If you cannot say how many hours a package takes, you are gambling every time you send a proposal.
• Never raising. Costs rise every year. A price you have not touched in two years is a pay cut you gave yourself.

What this looks like in your first 90 days

A realistic sequence, if you are starting from nothing:

1. Week 1. Do the cost calculation. Get your floor number and your internal hourly rate.
2. Week 1–2. Pick your unit. Draft three offers: entry, core, upgrades. Set the five scope boundaries.
3. Week 2. Put the prices, or a starting price, on the page. One worked example alongside them.
4. Weeks 3–8. Sell. Track hours on every job, honestly, including admin. Note every objection verbatim.
5. Week 8. First review. Compare quoted vs actual hours. Adjust the core package. Turn the most-requested extra into a paid add-on.
6. Weeks 9–12. Second batch of conversations at the adjusted price. If nobody flinches, raise again.

Nothing in that sequence requires a finished brand, a full website, or a business plan. It requires arithmetic and ten conversations. If you are earlier than this and still working out whether the service sells at all, the sequence in idea to first customer comes first — price the thing you have already proven someone wants.

The short version

• Calculate your floor before you look at any competitor: annual costs plus your pay plus tax, divided by 1,000–1,300 realistic billable hours. Add 20–30% margin.
• Charge by project or package rather than hourly as soon as you can predict delivery time. Hourly penalises you for getting good.
• Build three offers — a $150–$750 entry offer, a core package most buyers should pick, and priced add-ons instead of a bloated base.
• Publish a price or a starting price. It filters buyers, shortens calls, and is the thing search engines and AI assistants can actually quote.
• Write down revisions, turnaround, communication, exclusions and payment terms before your first client tests them. Take 50% up front.
• Review after every 5–10 sales conversations. Close rate above 80% means raise; consistently overrunning your quoted hours means reprice or retighten scope.

The Service Pricing Guide takes the same structure and makes it fill-in-the-blank: the cost worksheet with every line item, a decision tree for choosing your pricing unit, ready-to-paste scope and payment terms, word-for-word objection responses, and the recovery paths for when you have already underpriced a client and need to raise it without losing them.