I was working 60 hours a week and barely surviving. Then I tripled my prices. Lost 2 customers. Gained 8 better ones. Here's how to price like you mean business.
The Undercharging Epidemic
Let me tell you what I see all the time: Talented entrepreneurs working themselves to death for poverty wages. Virtual assistants charging $15/hour. Consultants charging $50/hour. Designers charging $200 for a logo that took 10 hours.
You know what's happening? You're subsidizing your clients' businesses with your own poverty.
This is especially common among underestimated entrepreneurs, women, people of color, people without fancy degrees. We've been conditioned to believe we should be grateful for any opportunity. That we need to "prove ourselves" with low prices.
Bullshit.
Your prices should allow you to live comfortably while working reasonable hours. If they don't, your pricing is wrong.
The Real Cost of Your Time
Before you can price correctly, you need to understand your actual costs. Here's the math most people skip:
The True Cost Calculator:
What you need to earn per month (rent, food, bills, savings): $_______
Business expenses per month (tools, insurance, etc.): $_______
Taxes (assume 30% of gross income): Calculate later
Total monthly need: $_______
Now divide by realistic billable hours:
Working days per month: 20 (assuming 4 weeks, 5 days/week)
Hours per day you can actually bill: 4-5 (not 8 - admin, marketing, etc.)
Realistic billable hours per month: 80-100
Your minimum hourly rate = (Monthly need × 1.43) ÷ Billable hours
The 1.43 multiplier accounts for 30% taxes.
Example:
You need $4,000/month to live and run your business. That's $5,720/month before taxes. Divided by 80 billable hours = $71.50/hour MINIMUM. And that's just to survive. Want to actually build wealth? Add 20-30% to that number.
The 3 Pricing Models That Work
Model 1: Value-Based Pricing (Best for services)
Charge based on the value you deliver, not the time it takes. This is how to start a business that actually makes money in entrepreneurship.
How it works:
Identify the financial impact of your work
Charge 10-20% of the value you create
Package your services (not hourly)
Example:
You're a bookkeeper. Client makes $200K/year. You save them 10 hours/month and catch $5K in tax deductions. Value: $5,000+ annually. Your price: $500-800/month.
Not: $25/hour × 10 hours = $250/month (undercharging)
Model 2: Package Pricing (Best for defined deliverables)
Create tiered packages instead of custom quotes. This is one of the best business ideas for predictable income.
The 3-Tier Structure:
Basic ($X): Core service only
Standard ($2X): Core + extra features
Premium ($3-4X): Everything + VIP treatment
Example - Social Media Management:
Basic $500/month: 3 posts/week, 1 platform
Standard $1,000/month: 5 posts/week, 2 platforms, monthly strategy call
Premium $2,000/month: Daily posts, 3 platforms, weekly calls, paid ad management
Why this works: Most people pick the middle option. You make more money than if you only had one price.
Model 3: Retainer Pricing (Best for ongoing work)
Get paid monthly whether they use all your time or not. This is how you build sustainable entrepreneurship income.
How it works:
Client pays you $X per month
They get Y hours of work or specific deliverables
Unused hours don't roll over (usually)
Gives you predictable income
Example:
Virtual assistant retainer: $2,000/month for 20 hours. That's effectively $100/hour, but they're guaranteed income whether the client uses all 20 hours or not.
How to Raise Your Prices (Without Losing Everyone)
Strategy 1: Grandfather Existing Clients
Keep current clients at old rates for 3-6 months
Charge new clients at new rates immediately
After 6 months, raise existing clients with 30 days notice
Strategy 2: Add Value First
Enhance your service
Then announce price increase
Frame it as "Here's what's new, and here's the new investment"
Strategy 3: The Confidence Raise
Send email: "Starting [date], my rates are increasing to [new price]. I wanted to give you advance notice."
Don't apologize or over-explain
Those who value you will stay
The Price Increase Email Template:
Subject: Important Update About [Your Service]
"Hi [Name],
I wanted to reach out personally to let you know that starting [date 30 days from now], my rates will be increasing to [new price].
This adjustment reflects [the value I provide / additional services / market rates / my growing expertise]. I'm committed to continuing to deliver [specific value] for your business.
Your current rate will remain unchanged through [date], giving you time to adjust your budget.
I value our partnership and hope to continue working together. If you have any questions, I'm happy to discuss.
Best,
[Your name]"
What to Do When Someone Says You're Too Expensive
Response 1: The Value Reminder
"I understand it's an investment. Let's break down what you're getting: [list specific outcomes and value]. When you look at it that way, the ROI is [X]."
Response 2: The Budget Option
"I have a smaller package that might fit your budget better. It includes [core service only] for $[lower price]. Would that work?"
Response 3: The Qualifier
"It sounds like we might not be a fit right now, and that's okay. I work with clients who [description of ideal client]. When you're ready for that level of service, I'd love to work together."
Response 4: The Confidence Close
"I don't negotiate on price because I deliver exceptional value. My clients see [specific results]. If that's important to you, let's move forward. If not, I can recommend someone at a lower price point."
Signs Your Prices Are Too Low
Everyone says yes immediately without hesitation
You're constantly booked but not making enough money
Clients don't respect your time
You resent working with clients because you're underpaid
You're working 60+ hours a week and still struggling
Competitors charge 2-3x what you charge
If you checked 3+ of these, raise your prices this week.
The Pricing Audit
Do this exercise quarterly:
Calculate your actual hourly earnings (total revenue ÷ total hours worked)
Research what competitors charge
Ask yourself: "If I were the client, would I pay this?"
Calculate how much you'd need to charge to work 30 hours/week and live comfortably
Raise your prices to get closer to that number
Resources:
Research rates: Glassdoor.com, PayScale.com, Upwork.com rates
Pricing calculators: Bonsai.com pricing tool
Create proposals: Bonsai.io, HoneyBook.com
Book recommendation: Breaking the Time Barrier by Mike McDerment (free ebook)
Key Takeaway
"You don't have a business if you're not making money. Charge what you're worth. If someone can't afford you, they're not your customer."