Every new business owner asks the same question: "What should I charge?" And almost every new business owner gets the answer wrong - by charging too little. Underpricing feels safe because you think it'll attract customers. In reality, it attracts the worst customers, kills your margins, and trains the market to expect cheap work.

Here's how to actually set your prices.

The Floor: Your Cost-Based Minimum

Before you think about what the market will bear, calculate what you need to charge just to survive. This is your price floor.

The formula:

Monthly business costs (insurance, software, vehicle, equipment payments, supplies, marketing) + Monthly personal expenses (rent/mortgage, food, health insurance, taxes) + 20% profit buffer = Your monthly revenue target.

Divide by the number of billable hours you can realistically work per month (typically 80-120 hours, not 160 - you'll spend 40-50% of your time on non-billable work like marketing, admin, and travel).

Example for a cleaning business:

Monthly business costs: $1,200 (insurance, supplies, gas, marketing).
Monthly personal expenses: $4,000.
20% profit buffer: $1,040.
Monthly target: $6,240.
Billable hours: 100 (5 houses/day x 4 hours x 5 days/week).
Minimum hourly rate: $62.40/hour.
If a house takes 3 hours: minimum price per house = $187.

If you're charging $100/house "to be competitive," you're losing money. That's not a pricing strategy. It's a path to burnout and bankruptcy.

The Ceiling: Value-Based Pricing

The floor tells you the minimum. The ceiling is what your service is worth to the customer - which is often much higher than your costs.

A plumber who fixes a burst pipe at midnight charges $300-$500 for what might be 30 minutes of work. Is that "fair" based on time? Doesn't matter. The value to the homeowner (preventing $10,000+ in water damage) makes $500 feel like a bargain.

A consultant who saves a company $200,000/year through operational improvements can charge $50,000 for the project. The company still nets $150,000 from the engagement. Both parties win.

A web designer who builds a site that generates $100,000/year in leads can charge $15,000-$25,000 for that site. The ROI is obvious to the client.

Value-based pricing asks: "What is the outcome of my service worth to the customer?" not "How long does this take me?" The gap between those two answers is where profit lives.

Pricing by Business Type

Here's what the market actually pays for common service businesses:

House cleaning: $100-$250 per house (2-4 hours). Don't charge hourly - charge per house or per square foot. Hourly pricing punishes efficiency.

Pressure washing: $150-$500 per job (driveways $100-$200, houses $200-$500). Price by the job, not by the hour. As you get faster with experience, your effective hourly rate goes up.

Landscaping: $50-$100/visit for mowing (residential), $200-$500+ for design and installation work. Recurring maintenance contracts ($150-$400/month) provide the most stable income.

Photography: $150-$500/hour for portrait sessions, $2,000-$5,000+ for weddings, $500-$2,000 for commercial work. New photographers commonly charge $75/hour and wonder why they can't pay rent. Double it.

Consulting: $100-$400/hour depending on specialization. New consultants often charge $50-$75/hour because they feel "unproven." If your expertise saves the client money, time, or risk, charge accordingly.

Personal training: $50-$150/session for one-on-one, $20-$40/person for group classes. Package pricing (10 sessions for $1,200) locks in commitment and reduces cancellations.

Graphic design: Logos: $500-$5,000. Brand packages: $2,000-$15,000. Per-project pricing always beats hourly for creative work.

The Pricing Mistakes Everyone Makes

Mistake 1: Pricing based on competitors. If your competitor charges $100 and you charge $95, you've entered a race to the bottom. Someone else will charge $90. Then $85. Price based on your costs and value, not on what the cheapest alternative charges. There's always a market for quality at a fair price.

Mistake 2: Being afraid to raise prices. If you raise prices by 20% and lose 10% of your customers, you still earn more money. The math works in favor of higher prices with slightly fewer customers almost every time. Plus, the customers who leave over a 20% increase were probably your worst customers anyway.

Mistake 3: Charging hourly when you should charge per project. Hourly pricing caps your income and punishes you for getting faster. Per-project or per-job pricing rewards efficiency. A web designer who charges $5,000/website and builds it in 20 hours earns $250/hour. The same designer charging $75/hour earns $1,500 for the same work.

Mistake 4: Not including your taxes in pricing. If you need to earn $75/hour to cover costs and profit, you actually need to charge $95-$100/hour because 25-30% goes to taxes. Price for what you keep, not what you gross.

Mistake 5: Discounting to get your first clients. A 20% discount to "get started" becomes the price your first clients expect forever. They'll resist the increase. Offer your full rate from day one. If you want to attract early clients, offer added value (extra service, priority scheduling) rather than lower prices.

The Simple Test

If every prospective client says yes to your price without hesitation, you're too cheap. If nobody says yes, you're too expensive (or selling to the wrong audience). The sweet spot: 60-70% of prospects say yes. The 30-40% who say no weren't your ideal clients.

Charge what your service is worth, not what you think people want to pay. The right customers will pay for quality. The wrong customers will negotiate no matter what you charge.

See the full startup costs including realistic revenue projections for your business type in our guide library.