How to Charge More for Your Home Business or Freelance Services


A big mistake many service-based business owners and freelancers make is not charging enough for their services. It might make sense, starting out, to charge less as a way to entice clients, but not only can this lead to not getting clients, it can also lead to getting lower quality clients. Clients don’t want to be overcharged, but many clients who are focused on paying the cheapest, are often the most difficult to work with. To be able to pick and choose your clients, and make a living, you need to learn to price your services right.

How to Price Your Service

The goal of working at home is to be able to make a living, right? The first step is to decide how much money you need make to survive, or better yet, how much you need to live your life fully. Do you want to move to a nicer house or abroad? Do you want to be able to travel or work flexible hours? Do you want to pay off debt or afford to send your child to college? Once you decide the lifestyle you want, it’s a numbers game to determine how much to charge.

  1. Decide on what you want in life and determine how much it costs.
  2. Decide how much you’re going to work. Will you work 40 hours a week, 20 hours a week, more or less? The less you work, the more you’ll have to charge. That’s not a bad thing, unless you price yourself out of the market.
  3. How many of those hours will be billable hours? For example, if you work 30 hours a week, 20 of them could be billable to clients, the rest would be in managing your business, such as marketing, invoicing, etc.
  4. Decide how many weeks will you work during the year. Will you take a 2 week vacation? Maybe you want to take the whole month of August off. Subtract the number of weeks you’ll take off from 52 (i.e. if you take a two week vacation, 52-2 = 50 work weeks).
  5. Multiply the billable hours per week you plan to work with the number of weeks you plan to work. For example, if you plan to work 30 hours per week, billing for 20 of those hours, for 50 weeks a year, you multiply 20 hours X 50 weeks = 1,000, which is the total number of billable hours for the year.
  6. Divide the amount of money you want to make from #1 by the number of hours in #5. If you want to make $50,000 and will be billing 1,000 hours a year, divide $50,000 by 1,000 to get, $50.00 per hour. However, this is not what you’ll charge. 
  7. List your work overhead expenses per month. This is any expense you have related to running your service including phone and Internet, website services, etc.
  8. Multiply your overhead expenses #7 by 12 months, and then divide by the number of total hours you plan to work. In the example, your total hours is the overall number of hours you’d work. You multiply that by 50 weeks. In this example, it would be 30 hours X 50 weeks = 1,500 total hours. Next you multiply your overhead expenses by 12 months, and divide by the total hours. For example, if your overhead is $500 per month, multiply that by 12 ($6,000) and divide by your yearly work hours (1,500) to get $4.
  9. Add your hourly overhead cost #8 to your per hour rate #6. In the example, it would be $4 plus $50 = $54 per hour. But this still isn’t what you should charge.
  10. Add in padding. There is always an ebb and flow to business. Some weeks you’ll be flush with work and other weeks you might not have your goal billable hours. To help offset the lean time, you want to charge a little bit more and save. Consider charging 10 to 20% more than the result in #9. Multiply your per hour rate ($54) by .10 (10%) to get $5.40. Add this number to your per hour rate, $54 + $5.40 = $59.40. If you decide on 20%, you’ll multiply by .20 (54 X .20 = 10.80) and then add that result to your per hour rate (54 + 10.80 = $64.80)

In this case, you’d want to charge $59.40 or $64.80 per hour. You might round up to $60 and $65.

However, this is not all to consider. Here’s a few other things to factor in your pricing:

How to Charge More for Your ServicesWill you offer package or retainer discounts? Many services have lower fees for clients that buy a package or hire you for ongoing (i.e. 10 hours a month). Instead of discounting your hourly rate in #10 above, make this your discount rate, and add 10% to 15% on top of it for clients that hire you for one-off services. For example, if client hires you for 10 hours per month, his fee would be 10 X $60 or $600 per month. But if a client just wants one project, you want to charge 10% to 15% more than your $60 rate ($66 or $69 per hour).

What are your special skills and experience that might be worth more? If you have special degrees, certifications, or a lot of experience, you can charge more, especially if your service is in a specialized field.

Will the market pay your price? This can be a tough question to answer. It’s something many service businesses and freelances err on by thinking their base fee is too much. However, charging less not only means earning less, it also might make clients wonder about your quality. The best way to know if the market will pay your price is to charge your price and see what happens. With that said, there are a few things you need to do to show clients you’re worth the price.

How to Charge More for Your Services

I can’t tell you how many service-based businesses and freelancers I’ve talked to who were nervous about raising their rates, and eventually kicked themselves for not raising them sooner because clients were willing to pay a larger price. The key to earning more is:

  • Deliver quality service on time. You’d be surprised how many freelancers are lax with due dates and quality. If you meet your deadlines and provide a great service, that alone can set you apart.
  • When pitching a client, focus on the benefits and value you offer. What’s in it for them? How does your service help them specifically (save time? generate more leads? etc)? This is what you want to sell. If the client balks at price, remind them what they get (more time, more money, etc), instead of defending what you charge. Remember, clients don’t care how great you are. They only care about how your greatness can make things better for them.
  • Be willing to walk away from the client. Some people won’t pay your fee. If you’re worth what you’re charging, undercutting your price to get  a client sends the wrong message. It makes the client think your quote was overcharging. It also lets him think he can negotiate his price.

Don’t be afraid to set your prices higher than you might think you can earn. Yes, you might need to make some adjustments as you seek out clients, but working for less than you  are worth or deserve isn’t good either.

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