How to Set the Right Prices for Your Small Business Services

Pricing your services correctly is one of the most important decisions you’ll make as a business owner. Charge too little, and you won’t be profitable. Charge too much, and you might scare away potential clients. The key is finding a pricing strategy that reflects the value of your services, covers your costs, and appeals to your target market.

This guide walks you through the best pricing strategies for small business services, helping you set competitive, sustainable rates.

Step 1: Understand Your Costs

Before setting prices, you need to know how much it actually costs to run your business.

Consider these expenses:

• Direct costs, such as materials, software, and subcontractors.
• Indirect costs, such as rent, utilities, and business insurance.
• Taxes, including self-employment taxes, income taxes, and sales taxes if applicable.

Your pricing must cover all expenses plus leave room for profit. A good rule of thumb is to aim for a 20-50% profit margin, depending on your industry.

Step 2: Research Competitor Pricing

You don’t need to match competitors’ prices, but you should understand what similar businesses charge in your market.

Ways to research:

• Look at competitors’ websites and pricing pages.
• Ask in business networking groups.
• Check industry pricing benchmarks on sites like Upwork, Fiverr, or Glassdoor.

Position yourself based on value, not price. If your service includes extras like priority support or custom solutions, price accordingly.

Step 3: Choose a Pricing Model

There are several ways to price your services. The right choice depends on your business structure and the clients you serve.

Hourly rate – Best for freelancers and consultants.

• Simple and easy to calculate.
• Clients pay for the exact time worked.
• Income is limited by the number of hours you can work.

Flat fee (per project) – Best for service-based businesses.

• Predictable revenue for both you and the client.
• Encourages efficiency—earn more by working faster.
• Pricing must account for scope creep, which is unplanned work.

Retainer or subscription – Best for ongoing services like bookkeeping or marketing.

• Provides consistent, recurring revenue.
• Builds long-term client relationships.
• Requires clear service agreements to prevent overuse.

Value-based pricing – Best for businesses offering high-impact results, such as business coaching or web design.

• Clients pay based on perceived value, not time spent.
• Can be significantly more profitable.
• Harder to calculate than hourly or flat-fee pricing.

If unsure, start with flat-fee pricing for services and consider retainer pricing for long-term clients.

Step 4: Test and Adjust Your Pricing

Your pricing is not set in stone. As your business grows, you may need to increase rates to reflect your expertise and expenses.

Signs you’re underpricing:

• Clients say, “That’s cheaper than I expected.”
• You’re always fully booked, but profits are low.
• You hesitate to send invoices because you feel underpaid.

Signs you’re overpricing:

• You get a lot of inquiries but few conversions.
• Competitors with similar services charge significantly less.
• Clients frequently try to negotiate lower rates.

If you’re fully booked and turning away work, raise your rates.

Step 5: Clearly Communicate Your Pricing

Transparency builds trust. Make it easy for clients to understand what they get for the price they pay.

What to include on your pricing page:

• Packages and what’s included.
• Any extra costs, such as add-ons or rush fees.
• Payment terms, such as due upfront, monthly, or upon completion.

Use a pricing calculator on your website to help potential clients see what fits their budget.

Final Thoughts: Set Prices That Support Your Business Growth

The right pricing strategy helps you attract ideal clients, stay profitable, and grow your business sustainably. Don’t be afraid to experiment and adjust your prices as needed.

Need help setting up your business finances or pricing model?