How to Price Your Services: Cost, Overhead, Profit and the Market

To price your services, work out what one job or one month of service costs you to deliver: the labor at what an hour costs you, the materials, and a share of your overhead. Add the profit you want as a margin on the price, round the result, and compare it with what clients in your market pay for similar work. Then decide how you'll bill it: per job, by the hour or on a recurring invoice. Review the price whenever your costs change.

This page is for a service business pricing its jobs and packages, including one with staff. If you work alone and want a personal hourly rate, read how to set freelance rates. For the billing models side by side, see freelance pricing strategies, and for estimating the hours a job takes, how to estimate project hours accurately.

1. List what each job uses

Pick one service and write down everything a typical job of that kind uses:

• Labor hours: for each person, including travel, setup, admin and the follow-up call, not only the time on the main task.
• Materials and supplies: anything used up on the job or bought for the client.
• Job-specific costs: software seats, equipment rental, permits or parking charged to that one job.

Use your records from past jobs where you have them. Billed's time tracking page says: "Past entries also give you a record to estimate the next project from."

2. Cost the labor

For each person on the job, multiply their hours by what an hour of their time costs the business:

• Staff: the hourly wage plus what employing them adds on top, such as payroll taxes and benefits. Ask your accountant or payroll provider for that figure.
• Yourself: the hourly amount you need to pay yourself. If you haven't set it, work it out first with how to set freelance rates.

3. Add a share of overhead

Overhead is what the business pays every month whether or not a job is running: rent, insurance, software, phones, accounting fees and the hours spent on sales and admin. Spread it over the hours you bill:

Overhead per hour = monthly overhead ÷ billable hours a month

Multiply that figure by the labor hours on the job. If a quiet month means fewer billable hours, the overhead per hour goes up, so use a realistic monthly average.

4. Add your profit

Add profit as a margin, a share of the final price, rather than a markup on cost, and be clear which one you mean:

• Price with a margin: price = cost ÷ (1 − margin). A 30% margin on a $100.00 cost is $100.00 ÷ 0.70 = $142.86, and $42.86 is 30% of $142.86.
• Price with a markup: price = cost × (1 + markup). A 30% markup on a $100.00 cost is $100.00 × 1.30 = $130.00, and the $30.00 profit is 23% of $130.00.

Write down the margin you're aiming for, and use the same formula every time.

5. Check the price against the market

Compare the result with what clients in your area or niche pay for the same work: published price lists, quotes your clients show you, and the prices you've won and lost at. If your price comes out higher, change what the package includes, or how the work is done, rather than cutting the margin. If it comes out well below what others charge, check whether you've left a cost out.

6. Choose how to bill it

• Per job: one fixed price for a defined scope. Write down what the price covers and the rate for anything outside it.
• By the hour: for work whose size you can't see in advance. Track the hours and show them on the invoice.
• Recurring: for the same service every month or every week. Billed's recurring invoices page says: "Choose whether to send invoices daily, weekly, monthly or yearly."

Whichever you choose, write the price on an estimate and send it before the work starts. Billed's invoice software page says you can "save the products and services you sell so you can pull them into an invoice instead of retyping them."

Worked example: pricing a monthly bookkeeping package

Sample figures, for illustration only. A two-person bookkeeping firm prices a monthly package for a small client:

• Assistant: 6 hours × $25.00 = $150.00 ($25.00 is what an hour of the assistant costs the firm, including payroll costs).
• Owner review: 1.5 hours × $45.00 = $67.50.
• Software for that client's books: $20.00.
• Overhead: $1,800.00 a month ÷ 240 billable hours = $7.50 an hour; 7.5 labor hours × $7.50 = $56.25.

Cost of one month: $150.00 + $67.50 + $20.00 + $56.25 = $293.75.

With a 30% margin: $293.75 ÷ 0.70 = $419.64, rounded to $420.00 a month. The profit is $420.00 − $293.75 = $126.25, which is 30% of $420.00 (to the nearest percent).

For comparison, a 30% markup gives $293.75 × 1.30 = $381.88, with a profit of $88.13, or 23% of the price.

The firm then compares $420.00 with the monthly packages other local firms publish. If it's higher, the firm checks which tasks the package can drop before it touches the margin. Use your own figures; these are only an illustration.

Review your prices

Look at the numbers again whenever wages, rent or software costs change, and once every twelve months at minimum. Compare each service's price with its cost, using your records rather than memory. Billed's financial reporting page says: "See how profitable your business is with Income vs Expense report."

Give existing clients written notice of a price change before the invoice that carries it.

Where Billed fits

Billed publishes this page, and Billed is invoicing software. The Billed features above are quoted from Billed's own pages, checked October 31, 2026. Billed's time tracking page also says: "Before you set the hourly rate on a project, work out what an hour of your time needs to earn once costs and unbilled hours are counted."

Mistakes to avoid

• Pricing from labor and materials alone, with no share of overhead.
• Counting only the hours on the main task, not travel, setup and admin.
• Mixing up margin and markup, then earning less profit than planned.
• Copying a competitor's price without checking it against your own costs.
• Leaving prices unchanged after your costs go up.

When this guide isn't for you

If you sell physical products, you also need to account for stock, shipping and returns, which this page doesn't cover. If your fees are set by a contract, a funder or a regulator, such as some public-sector or insurance work, start from those rules. For tax on what you charge, ask an accountant about the rules where you work.

Related Articles

• How to Set Freelance Rates
• Freelance Pricing Strategies
• How to Negotiate Freelance Rates
• How to Create a Business Budget

Frequently Asked Questions

How do I calculate a price for a service?

Add up the labor at what an hour costs you, the materials and a share of your monthly overhead, then add your profit margin: price = cost ÷ (1 − margin). Compare the result with what clients in your market pay for similar work before you publish it.

What is the difference between margin and markup?

Margin is profit as a share of the price; markup is profit as a share of the cost. On a $100.00 cost, a 30% margin gives a price of $142.86, while a 30% markup gives $130.00.

When should I use a fixed price instead of an hourly rate?

Use a fixed price when you can define the scope in advance, and charge by the hour when you can't see the size of the work. For the same service every month, bill a fixed amount on a recurring invoice.

How often should I review my prices?

Whenever your main costs change, such as wages, rent or software, and once every twelve months at minimum. Give existing clients written notice of a change before the invoice that carries it.