The most common pricing mistake is not undercharging by 20%. It is undercharging by 60%, because the number was chosen by looking at what other people advertise and flinching.
Here is how to work out a floor you can defend, how to move past hourly billing, and how to raise prices on existing clients without losing the ones worth keeping.
Quick Info
Start with
Your real annual cost and billable hours
Typical billable proportion
50% to 60% of working hours
Better than hourly
Fixed project price
Best where possible
Price tied to the value of the outcome
How often to raise
Annually, and with every third new client
Sign you are too cheap
Everybody says yes immediately
Work out your floor first
Not what to charge. The number below which the business does not work, which most freelancers have never calculated.
01Decide the salary you need. Be honest, including pension and holidays.
02Add business costs: software, insurance, accountancy, equipment, training, workspace.
03Add tax. Roughly a third, depending on your situation.
04That is your required annual revenue.
05Now count real billable hours. Forty hours a week is not forty billable hours; sales, admin and unpaid work take 40% to 50%. Twenty to twenty-four billable hours a week is realistic.
06Multiply by working weeks, minus holiday and illness. Forty-four weeks is a reasonable planning figure.
07Required revenue divided by billable hours is your floor.
A worked example: £45,000 salary, £6,000 costs, £17,000 tax gives £68,000 revenue. Twenty-two billable hours across forty-four weeks is 968 hours. That is a £70 hourly floor, before profit or growth.
Most freelancers set their rate by dividing a salary by 2,000 hours. That produces a number that cannot sustain the business it is supposed to fund.
Then price above the floor
The floor is survival. Your actual price reflects what the work is worth to the client, what you bring that others do not, and what the market bears.
—Specialisation raises prices more than experience does. A generalist competes on price; a specialist competes on fit.
—Demonstrable outcomes justify more than credentials. A case study with a number in it is your best pricing argument.
—Speed is worth paying for. Delivering in two weeks what others take six to do is a premium, not a discount.
—Risk you absorb is chargeable. Fixed price, guarantees and accountability all cost you and are worth paying for.
—Scarcity is real. Being visibly busy supports your price better than any negotiation technique.
Move off hourly billing
Hourly billing punishes efficiency, caps your income at your hours, and makes every conversation about time rather than outcome. It is a fine place to start and a bad place to stay.
Fixed project pricing
—Scope precisely, including what is not included. Vague scope is why fixed prices go wrong.
—Price from your estimated hours plus 20% to 30% for the things you have not thought of.
—Define revisions: two rounds, then it is a new piece of work.
—Bill 50% up front. This is standard, it filters non-serious clients, and it protects your cash flow.
—Include a change process, so scope creep has a price rather than an argument.
Retainers
—Best for ongoing work with predictable demand. Predictable income is worth a modest discount.
—Define what is included, in hours or in deliverables. Unlimited access is how retainers become resentful.
—Review every six months, at which point you raise it.
Value-based pricing
—Where you can tie the work to a number: revenue, savings, hours recovered.
—Ask what the problem costs them now. If a broken process costs £4,000 a month, a £6,000 fix is easy arithmetic.
—Requires evidence you can deliver, which means case studies.
—Not available for every engagement, and worth pursuing where it is.
How to present a price
01State it plainly, once, without apologising or explaining it away.
02Give the price in the context of the outcome, not the hours.
03Offer two or three options at different scopes, which changes the question from whether to which.
04Put it in writing immediately after the conversation.
05Then stop talking. The instinct to fill the silence is where discounts come from.
Anchoring works: present the fuller option first, so the middle option reads as reasonable rather than as the ceiling.
Raising prices
The two mechanisms, and both are necessary.
With new clients
Raise the price with every third new client until people start hesitating. That hesitation is the market telling you where the edge is, and you will be surprised how far up it sits.
With existing clients
—Annually, as a matter of routine. Expected increases are accepted; surprise ones are resented.
—Give thirty to sixty days' notice, in writing, with a brief reason.
—No apology and no elaborate justification. "My rates are increasing to X from January" is sufficient.
—Expect to lose some. The ones you lose are usually your lowest-margin, highest-maintenance clients.
—Raise the worst-fit client's price first, as a test. If they leave, you have freed capacity.
If nobody has ever pushed back on your price, you have not yet found out what it could be.
Handling the objection
—"That's more than I expected." Ask what they expected and what for. Often the scope is the mismatch, not the price.
—"Can you do it cheaper?" Reduce scope, never rate. A smaller piece of work at the same rate protects your pricing.
—"We had a quote for half that." Ask what it includes. Frequently it is a different job, and saying so calmly is more persuasive than defending your number.
—"We have no budget." Then they are not a client yet. Offer a smaller first piece or leave the door open.
—Discount only for something in return: a longer commitment, a case study, upfront payment, or work you actively want.
Publish something
Not necessarily a full price list, and something. A starting figure, a typical range, or an example project with a number attached.
It filters out people who cannot afford you before they take an hour of your time, and it increases conversion among people who can, because vagueness reads as evasion. In client work this is one of the highest-return changes available to a service business, and most refuse to do it. The pricing page argument covers it further.
Frequently Asked Questions
How do I work out my hourly rate?
Required annual revenue, including salary, costs and tax, divided by realistic billable hours. Twenty to twenty-four billable hours a week is realistic, not forty.
Should I charge hourly or per project?
Per project once you can scope reliably. Hourly caps your income at your hours and makes every conversation about time rather than results.
How much should I raise my prices?
Raise with every third new client until people hesitate, and raise existing clients annually with thirty to sixty days' notice.
What if a client says I am too expensive?
Ask what they expected and for what. Reduce scope rather than rate, and only discount in exchange for something concrete.
Should I publish my prices?
Publish something: a starting figure or a typical range. It filters unsuitable enquiries and converts suitable ones better than silence.
How do I know if I am charging too little?
Everybody says yes immediately, you are busy and not profitable, and your clients are the most demanding ones. All three point the same way.
Before You Go
Calculate the floor honestly, price above it based on the outcome rather than the hours, move to fixed project pricing, raise annually, and publish a starting figure.
The pricing decision compounds more than any marketing tactic: the same work at 40% more is a different business. Cash flow is the other half of making the numbers work.
Calculate the floor. Then price the outcome.
WRITTEN BY TARIQ SALLAM
Marketing Consultant. Entrepreneur. Content Creator.
I'm a marketing consultant, entrepreneur and content creator. I help businesses grow through practical marketing, websites, SEO, content and AI.
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