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How do you price a service-based business?

Prices can vary significantly in professional services. How did you price your services and how do you know you're priced correctly? 

Top voted answer
Greg Reiffel

Greg Reiffel at GREG REIFFEL CONSULTING

Usually based on the type of work and who for. For example government departments are slow payers, so I build in a higher margin to account for this. Otherwise my terms are seven days.

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Michael Simonetti

Michael Simonetti, Founder and Director at

Something i've been answering for over 20 years. When we first started, I never knew what to charge, it is a guessing game, trial and error to work out where your services sit, vs the market-place as a guide. It should constantly evolve. Start higher leaves room for negotiation, and always ask the obvious question - what is the budget... but be tactful about this - you may be able to ask it straight out, but you may need to build the conversation into this point and find a good reason to ask it; I normally give a range in that case, (as service is dependant on the amount of hours we put in), and talk to that as a ballpark. Then justify it. You can throw a BIG silly number out there too always helps break the ice - it won't cost a million $... plenty of sales techniques i've tried throughout the years like this; they can all work, they can all fail. The main point is feel out the conversation with the potential client, a good conversation and alignement will help justify your service offering as it is rarely apples vs apples they are buying  

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Steve Gray

Steve Gray, Director at Gray Capital Investments

Top 10% Marketing

Pick a price, double it and add 10% - Seriously this was advice I was given many years ago and at times this simple thinking has helped me explore my pricing and gave me an alternative to my logically figured out rate.

If you are lucky you can find prices for similar services through an industry group, or you can do a mystery customer call to a competitor. That can be a start, it can also be misleading. Just because someone has been in business for a bunch of years does not mean they are making a profit or even getting enough work to thrive.

If you aret he busness operator you should be beingn paid a rate that reflects the risk and effort you go to for being in business. So let's say you need an executive salary of $90k per year and that's just your wages.

Now divide that into 220 days of work, htat's the number of useable days in a working year, leaving out holidays, weekends, public holidays, sick leave. That means you need to earn about $410 per day to meet that need. That's around $70 per hour in a full day... NOTE you will rarely work a full 8 hour day so I figured it down to 6 hours.

Now add in your other costs, materials, travel, insurance etc and that gives you your base price, then add in a profit margin.

Over time you can be more practiced at this and can reflect back and say how well did my pricing work out on each job?

Ok so lets say you are a handyman and are asked to fit a couple of shelves into a wardrobe.

Materials $25
Time 2 Hours $140
Travel time - 30 mins $35
Overheads - $30
Sub Total $230
add Profit of 10% = $23
New total $253

Hope that helps.

Yee Trinh

Yee Trinh, Cofounder at

Given a straight out service business with no materials, is it oversimplifying it to know the market rate and provide price on premium or discount depending on your brand/service quality?

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