Pricing Your Work When You're Afraid to Charge More
If you've ever quoted a price and immediately wished you'd said a bigger number, this one is for you.
Almost every business owner we meet at the Community Cornerstone Project has the same worry. They're good at what they do. They can tell you the price of a bag of flour, a box of nails, or a gallon of paint without blinking. But when a customer asks what they cost, something tightens up — and the number that comes out is lower than it should be.
Here's the thing: underpricing doesn't feel like a crisis. It feels like being reasonable. It feels like being fair. That's exactly why it's dangerous. You can stay busy for two full years at the wrong price and never realize the problem is the price — you'll just think you need more customers.
So let's take the emotion out of it and do the math instead.
Why the fear is real, and why it's misleading you
The fear usually sounds like one of these:
"People around here can't afford more." Some can't. Many can. You are quoting one person at a time, not the whole city.
"Someone else does it cheaper." Someone always does. There is no floor to that race, and the bottom of it is where businesses close.
"I'm not experienced enough yet." Your price covers the work being done well, not the number of years you've been doing it.
"I don't want to seem greedy." Charging enough to stay open isn't greed. Closing your doors doesn't help a single customer.
Every one of those is a feeling. Feelings are fine — but they shouldn't be setting your rates. A number should.
Start at the end: what do you need to live on?
Most people price from the outside in. They look around, see what others charge, and land somewhere just underneath. That's backwards. Price from the inside out instead — start with what you need, then work back to the hour.
Step 1: Your personal number
What do you need this business to pay you in a year? Not your dream number. Your actual number: rent or mortgage, car, food, utilities, insurance, phone, childcare, debt payments, and something set aside for the month the transmission goes out.
Add it up. Be honest. For our example, let's say that's $45,000.
Step 2: What the business itself costs
This is separate from your personal number. Your business has its own bills: supplies, tools and replacements, software, your phone line, mileage and gas, insurance, licenses, marketing, bank and card processing fees, an accountant.
Let's say those run $6,000 a year.
Step 3: Taxes, which are not optional
This is the step that sinks people. When you work for someone else, taxes come out before you ever see the check. When you work for yourself, nobody takes it out — so it feels like income right up until April.
As a self-employed person you owe self-employment tax on top of regular income tax. Set aside a meaningful share of everything you take in, and talk to a tax preparer about the right figure for your situation. For this example we'll use 30%. Whatever your number turns out to be, don't build a price that pretends taxes aren't coming.
Step 4: Count your billable hours, not your working hours
Here's the mistake almost everybody makes: dividing by 40 hours a week.
You do not get paid for 40 hours a week. You get paid for the hours you're actually doing the work a customer is paying for. The rest of your week — quoting, invoicing, chasing payments, driving, buying supplies, answering messages, posting on social media, doing your books — is real work, and it's unpaid.
For most solo owners, somewhere between half and sixty percent of working time is billable. And you don't work 52 weeks. Take out vacation, holidays, and the week you get the flu.
So: 20 billable hours a week, times 48 weeks, equals 960 billable hours a year.
Step 5: Put it together
Personal income needed: $45,000
Divided by 0.70, to cover the 30% going to taxes: $64,285
Plus business expenses: plus $6,000
Revenue you need: $70,285
$70,285 divided by 960 billable hours: $73 per hour
Round it to $75 an hour.
Now, how does that compare to what you've been charging? For a lot of people seeing this math the first time, the honest answer is "about half." That gap isn't a failure. It's just information you didn't have before.
And notice what that number is. It isn't what you're worth. It's what it costs to keep your doors open. Those are two different things, and only one of them is negotiable.
But I don't charge by the hour
Good — most customers would rather hear one flat price than watch a clock. You should still know your hourly number, because it's how you check whether a flat price is any good.
Estimate the hours honestly, including setup, cleanup, and travel. Multiply by your rate. Add your materials with a markup on top, because you're carrying the cost, the trip to get them, and the risk if something's wrong. Then add a cushion for the job running long, because sometimes it will.
A job you estimate at 6 hours, at $75, with $120 in materials marked up to $150, comes out at $600 in labor plus $150 in materials — $750. If your gut says "I'd have charged $400 for that," you just found out why the money's been tight.
Five things that make a higher price easier to say out loud
Write it down before the conversation. Reading a prepared number is far easier than inventing one while somebody watches your face.
Say the number, then stop talking. The silence after a price feels much longer to you than it does to them. Don't fill it by talking yourself down.
Put it in writing. A simple written quote listing what's included makes the price look considered instead of made up.
Raise it on new customers first. You don't have to reprice everyone on Monday. Quote the new rate to the next person who calls and see what happens. Usually: nothing.
Let some people say no. If nobody ever flinches at your price, it's too low. A few no's mean you found the edge.
What actually happens when you raise your price
You lose some customers. Usually the ones who called three times to negotiate, paid late, and were hardest to please.
The rest stay. And you do fewer jobs for the same money, which gives you back the thing you've been shortest on — time. Time to answer the phone. Time to follow up on the estimate you never sent. Time to be home for dinner. Time to build the business instead of just surviving it.
The business that charges enough is the business that's still here in five years. That's the one your customers actually need you to run.
Need help running your numbers?
The Community Cornerstone Project works with small business owners and aspiring entrepreneurs right here in Erie — pricing, planning, and the practical side of getting a business off the ground and keeping it there. Stop by 930 Liberty Street or reach out to learn more about our programs.