Pricing: how to arrive at your hourly rate

In short: A price should cover costs, enable an income and fit the market. The most common beginner mistake: selling too cheaply because you forget costs, taxes and unpaid time.

Step 1: What should come in?

Work backwards from the wish. Example: you want to make €3,600 profit a year.

1. Costs per year (hosting, software, insurance, device depreciation, travel): for example €800.
2. Plan for taxes and charges on the profit (see Taxes for pupils and apprentices with side income). With small profits often little, with more it grows.
3. Target turnover = profit + costs = €4,400 (before tax).

Step 2: How many paid hours are there really?

Not every hour is paid: offers, client talks, bookkeeping, training and idle time cost time. As a rule of thumb only 50 to 70% of working time is billable. At 5 hours a week that is about 3 paid hours, around 150 a year.

Step 3: Hourly rate

hourly rate = target turnover / paid hours = €4,400 / 150 = about €29.

Kinds of price

• Hourly rate: fair when the scope is unclear.
• Fixed price: the customer likes predictability, you carry the risk; include a buffer (20 to 30%).
• Packages/subscriptions: maintenance, hosting, care as a monthly amount.
• Value-based: by the benefit to the customer, not by your time.

Comparison and control

1. Look at similar offers. Too cheap also looks unprofessional.
2. After the job time it and check what actually came out.
3. Adjust prices yearly.

As a small business owner no VAT is added (Small business: limits and switching); under regular taxation 19% is added to the net price (for private customers it acts as a price surcharge).

See also: One year of bookkeeping, Marketing for beginners: finding customers