Learning how to price your services is one of the most important decisions in your business — it affects every single thing else. It determines how many clients you need, how much you can invest in growth, and whether you can take a day off without panicking.
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Most people who try to price their services for the first time set them far too low. Not by a little — by a lot. They do it because they’re not confident, because they’re afraid of rejection, or because they feel like they haven’t “earned” higher rates yet. The result is a business that requires twice as many clients to survive, burns through your energy faster, and attracts exactly the customers you least want to work with.
Here’s how to price your services when you’re just getting started — and how to avoid the most common mistakes.
Stop Guessing: How to Price Your Services With a Clear Formula
Before you can price your services correctly, you need to know what you actually need to earn. This sounds obvious, but most people skip it. They pick a number that “feels right” or that they found by looking at what someone else charges — without ever doing the math for themselves.
Your number is this: the total monthly income you need to cover your expenses, pay yourself a reasonable salary, and have a small cushion for taxes and unexpected costs. Write it down. Make it concrete.
Now work backwards. If you want to earn $5,000 a month and you can realistically handle five active clients, each client needs to be worth at least $1,000. If the going rate in your market is $300 per project, you have a problem — and no amount of hustle will fix it. You either need to raise your prices, take on more clients than you can handle well, or find a higher-value niche.
Knowing your number makes pricing decisions much clearer. Instead of wondering whether to charge $400 or $500, you’re asking whether this price level is compatible with the business you actually want to build.
Why Low Prices Attract the Wrong Clients
Here’s something counterintuitive: the clients who push hardest on price are almost always the most difficult to work with. They negotiate more, ask for more revisions, pay late more often, and respect your time least. Meanwhile, clients who pay a premium tend to be more trusting, more decisive, and more pleasant to deal with.
Low prices signal availability rather than expertise. When you charge below-market rates, you attract clients who are optimizing for cost — and those clients will always want more for less. When you charge a premium, you attract clients who are optimizing for outcome — and those clients will trust you to deliver it.
This doesn’t mean you should charge the maximum possible for every project. It means that underpricing to “win” clients is a strategy that backfires. The clients you attract at low prices are rarely the clients worth having.
Hourly vs. Project vs. Retainer: Which to Use
There are three main ways to structure your pricing, and each has different implications for your income and workload.
Hourly pricing is easy to explain and feels fair, but it penalizes you for getting faster. If you can do something in two hours that used to take four, you earn half as much for the same result. It also creates uncomfortable conversations about time tracking and scope creep.
Project pricing (a flat fee for a defined deliverable) is better for most service businesses. It lets you capture the value you create rather than the hours you spend. It also forces you to define scope clearly, which prevents a lot of the scope creep that kills projects.
Retainer pricing (a fixed monthly fee for ongoing work) is the most predictable model and the most sustainable for solo businesses. It creates reliable monthly income, deepens client relationships, and reduces the time spent on constant re-selling. If your service can be structured as ongoing work, retainers are usually worth pursuing.
Most mature service businesses use a combination: project pricing for new clients, transitioning to retainers for the good ones.
How to Handle “That’s Too Expensive”
When someone says your price is too high, there are three possibilities: they genuinely can’t afford it, they don’t see enough value in what you’re offering, or they’re testing to see if you’ll negotiate. How you respond depends on which one it is.
The worst thing you can do is immediately drop your price. It signals that your original price wasn’t real, erodes trust, and often doesn’t close the deal anyway. If they pushed once and you caved, they’ll push again.
A better approach: ask what their budget is, and then either match the scope to the budget (“at that budget, here’s what I can do”) or hold your price and explain what they’re getting for it. Sometimes the objection is really about uncertainty, not money — they don’t know if they’ll get their investment back. Addressing that concern directly is often more effective than lowering the number.
Raise Your Prices Before You Think You’re Ready
The best indicator that it’s time to raise your prices is a full client roster. If you’re turning away work because you don’t have capacity, you’re underpriced. Simple as that.
Most people wait until they feel ready — until they’ve added some credential, launched a new service, or redesigned their website. But confidence usually follows the price increase, not the other way around. Raise your prices for new clients first. See what happens. Most of the time, fewer people say no than you expect.
Pricing is something you revisit regularly, not something you set once. As you gain experience, deliver results, and build a track record, your prices should reflect that. A service that costs $500 from a beginner and $500 from someone with five years of proven results is not the same service. Don’t price them the same.
For more on this topic, check out Ramit Sethi on pricing strategy.
The Psychology Behind How You Price Your Services
Pricing is not just math — it is psychology. How you present your prices matters as much as the actual numbers. Research consistently shows that customers perceive higher-priced services as higher quality, even when the underlying service is identical. This is called the price-quality heuristic, and smart solopreneurs use it to their advantage.
When you price your services, always present three options: a basic package, a recommended middle package, and a premium package. This is called anchoring. The premium option makes your middle option look reasonable by comparison, and most clients will choose the middle tier. This simple technique increases average revenue per client by 20 to 40 percent without changing anything about your actual service delivery.
Never apologize for your prices. When you present your pricing with confidence, clients read that confidence as competence. When you hesitate, offer unsolicited discounts, or say things like “I know it seems expensive,” you undermine the value of your own work. State your price clearly, explain the specific value they receive, and let the client decide on their own timeline. The right clients will say yes because they recognize the value. The wrong clients will try to negotiate you down regardless of what you charge. Learning to distinguish between these two groups early saves you enormous time and emotional energy throughout your career as a service provider.
Comparing Pricing Models: Which One Works Best
There are four main ways to price your services: hourly, per-project, retainer, and value-based. Each model has distinct advantages and trade-offs depending on your specific business model, industry norms, and client expectations and the type of work you do. Understanding all four helps you choose the right model and adapt as your business grows.
Hourly pricing is the simplest to understand but often the worst for solo founders. It caps your income based on available hours and penalizes efficiency. If you complete a project faster because you are skilled, you earn less. Hourly works for ongoing advisory work where scope is unpredictable, but avoid it for defined projects.
Project-based pricing ties your fee to a deliverable rather than time spent. This rewards efficiency and gives clients certainty about costs. Always define scope clearly in your proposal so that additional requests become separate paid work. This is the best starting model for most service-based solopreneurs learning to price your services.
Retainer pricing provides predictable monthly income in exchange for an agreed-upon scope of work. Clients pay the same amount each month regardless of whether they use all your hours. This model works best for ongoing relationships like marketing support, bookkeeping, or consulting. It smooths out your revenue and reduces the constant hustle for new projects.
Value-based pricing is the most profitable but requires the most confidence and experience. You charge based on the outcome your work delivers rather than the effort involved. If your marketing strategy generates $50,000 in new revenue for a client, charging $5,000 is a bargain — even if it only took you 10 hours. This model requires understanding your client’s business deeply and communicating ROI clearly.
How to Handle Price Negotiations Without Losing the Deal
Negotiation is inevitable when you price your services at the right level. Clients who never push back on price are a sign that you are charging too little. The goal is not to avoid negotiation but to handle it confidently.
When a client says your price is too high, ask what their budget is. Often there is a gap between your price and their budget that can be bridged by adjusting scope rather than reducing your rate. Offer to remove certain deliverables or extend the timeline to meet their budget. This preserves your rate while giving the client a workable option.
Never reduce your price without reducing scope. If you simply drop your fee, you teach the client that your original price was inflated and that negotiation always works. Instead, reframe the conversation: “I can absolutely work within that budget. Here is what we can accomplish at that price point.” This maintains your professional positioning and perceived value while being genuinely flexible and accommodating to the client. Over time, you will find that clients respect this approach far more than automatic discounting because it demonstrates that your pricing has real substance and structure behind it.
The Top 5 Pricing Mistakes Beginners Make
After working with hundreds of new solopreneurs, clear patterns emerge in how beginners price your services incorrectly. Avoiding these five common mistakes will immediately put you ahead of most new founders.
First, copying competitor prices without understanding their cost structure. Your competitors may have different expenses, experience levels, or business models. Their pricing is based on their situation, not yours. Second, pricing based on what you would personally pay rather than what the market supports. Your personal spending habits are irrelevant to what your target clients will pay for professional services.
Third, failing to account for non-billable time. For every hour you spend with a client, you likely spend another hour on administration, marketing, learning, and business development. Your pricing must cover all of your working hours, not just client-facing ones. Fourth, not building profit margin into your rates. Many beginners calculate their rate based on covering expenses and paying themselves a salary, forgetting that a healthy business needs 15 to 25 percent profit margin for growth, emergencies, and investments.
Fifth, giving discounts to anyone who asks. While flexibility has its place, habitual discounting trains clients to expect lower prices and devalues your expertise. A better approach is to offer different packages at different price points so clients can choose based on their budget without you ever reducing your actual rates. Create a basic, standard, and premium tier for your services. This gives price-sensitive clients an entry point while directing most buyers toward your recommended middle option. Tiered pricing also increases your average revenue per client because a meaningful percentage will always choose the premium option when presented with clear additional value at each level. This strategy lets you price your services confidently while accommodating a range of budgets.
Frequently Asked Questions
How do I price my services for the first time?
To price your services correctly, start by calculating your monthly expenses and desired income. Divide that by the number of clients you can realistically handle. This gives you your minimum rate. Then research what competitors charge and position yourself based on the value you deliver, not just time spent.
Should I charge hourly or per project?
Per-project pricing is almost always better when you price your services. With project pricing, you define a clear scope and deliverable upfront, quote a fixed fee, and earn the same amount whether the project takes you 5 hours or 15 hours. As your skills improve and you work faster, your effective hourly rate increases automatically. This creates a natural incentive to become more efficient and develop better systems and processes over time. As your expertise grows, your effective hourly rate increases automatically without any awkward rate negotiation conversations with clients. Hourly rates punish you for being fast, skilled, and efficient. Project-based pricing lets you capture the value of your expertise and gives clients predictable costs. Start with project pricing from day one.
When should I raise my prices?
Raise your prices when you are consistently booked at 80 percent or more capacity. A good rule of thumb is to raise prices by 10 to 20 percent every six months during your first two years. Most solopreneurs undercharge dramatically in the beginning, so regular increases simply bring you closer to market rate. Track your close rate: if more than 80 percent of prospects say yes immediately, your prices are almost certainly too low. A healthy close rate is 40 to 60 percent, which means some prospects decline — and that is perfectly fine, when clients accept your rates without negotiation, or when you have gained new skills, certifications, or demonstrated measurable results for clients. The best time to price your services higher is when demand clearly exceeds your available supply. Remember that raising prices does not mean losing all your current clients — apply new rates to incoming clients first and grandfather existing clients for a transition period of three to six months.
What if clients say my prices are too high?
If every client says yes immediately, your prices are too low. Some price resistance is healthy and means you are pricing your services at the right level. Focus on communicating value and results rather than defending your rate. The right clients pay for outcomes, not hours. If price is the only thing a prospect cares about, they are not your ideal client. Let them find someone cheaper. Your energy is better spent on clients who value quality, reliability, and results. These clients are less likely to negotiate aggressively, more likely to refer you to others, and far more pleasant to work with long-term.
