How to use a Pricing Calculator to price your services like a pro
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Deciding what to price your services as a new business owner and freelancer, is hard!
Because you don't really know what that amount is supposed to cover and you don't know if it's enough to meet a goal that you have for the entire year, right?
Ultimately, as new business owners, we want consistency. We want reliable income so we can have reliable paychecks.
In order to do that, we need to figure out how to price our services so that we can actually reach our annual income goals.
But that sounds overwhelming, doesn't it?
Because I answer this question a lot on coaching calls, I've decided to help you figure this out by creating a calculator template, which you can fill out simply –and it will do the math for you.
This template will give you some basic guidelines & figures to figure out how to price all of your offers, without breaking the buttons on your actual calculator (or your phone –let’s be real here).
It will help you work out
how many projects, for each offer, you need to book every year in order to make that financial goal a reality?
or how much your hourly rate actually is, and
what your taxes, your expenses, your profit, –and your paychecks might look like,
and even your processing fees.
So you can take ALL of that into account and see the “big picture” while you figure it out.
It’s NOT a budget or a ‘financial planner.’ It’s just a tool to help you see realistic numbers so you can pinpoint what your financial goals should be, in order to achieve the big dream!
After all, if you don’t know what you’re working toward, how on earth will you ever get there??!
Now, let me take a step back.
quick disclaimer
Full disclosure: I am not a financial expert in any capacity and this isn't actually financial advice. It's really just a device or a tool that you can use to help figure out what your prices need to be based on whatever the calculator tells you those values will actually equate to.
So in other words, if you want to make six figures a year, right? If that's your end goal and you need to figure out how to work up to that, this is going to be a loose structure for you to start with. And then you'll have to iterate as you actually apply this to your business based on what actually happens, like how much your expenses actually are. If you have a team, how much you're paying them, like. All of those things come into it too.
That's my little legal bullshit disclosure here. I am not a financial expert and I am not a financial advisor. So please take this with a grain of salt. This tool is designed to give you a starting point, which you apply to your own situation, your own business, wherever you live, whatever those rates need to be.
Okay, so on that note, I'm about to show you the calculator, which will be available as a template in the shop!
I want you to have your own copy of this, so you don't have to recreate it.
But before I show you where that is, if you’re new around here, you might be wondering who I am. My name's Katelyn, and I run Launch the Damn Thing!® I am a Squarespace web designer and educator, and I like doing this kind of nerdy stuff to help people like you get through this tough stuff that was also hard for me when I first got started.
And if you're part of the LTDT fam, welcome back! I'm glad you're back in black with me.
Now let's dive into the template!
Page 1: Package & Hourly Pricing
This is the calculator template and as you can see, most of it is filled out FOR YOU, so you’ll have very little work to do yourself.
All ya have to do is fill in the values for the columns or the cells that are in yellow. Everything else will auto-fill for you, and auto-calculate based on pre-existing formulas or mapped data. (And, no, it doesn’t matter if you don’t know what that means!)
There’s a key over on the right that explains some of the terminology used in the spreadsheet and I've got simple instructions at the bottom that tell you what to do.
Fill out the top section’s columns A-C
List the names of your services, the packages, the offers, the products, whatever, –in the first yellow column. (I haven’t given you that much space, because you probably won’t need it because most new businesses don’t have that many offers/packages/services yet.)
Set the number of hours that it typically takes you to actually finish each service offering.
Then set the desired fee, –or whatever you think you want that number to be.
From there, all of the remaining columns in this top section are going to calculate based on parameters that I put into the formula for each column from D through H. Those formulas are multiplying by the following percentages:
Taxes: 20%
Profit: 5%
Expenses: 25%
Processing Fees: 3% (an approximation)
Paychecks: 50%
You can see what the formula is, if you click on the topmost cell in each of those columns (in D - H), but basically each column is multiplying the Desired Fee by the percentage, in decimal points:
Taxes = desired fee x .2
Profit = desired fee x .05
Expenses = desired fee x .25
remember, 3% of this –or. 03– is the processing fee which is an expense!
Paychecks = desired fee x .5
Examples
I have some examples ready!
Let’s test out some web design prices, because I'm a web designer too.
Let's say that a web design takes you 85 hours and you think you want to charge $2,000. So enter that value in the Desired Fee column C, and add “85” in the hours column B so you can see how that plays out.
If you charge $2,000, you'll have an approximate fee to collect the payment digitally with a card, of about $60 on that. So you've already lost $60 bucks.
For your taxes –this is obviously a very tough number to guesstimate for EVeryone, right?– but let's just say based on the Profit First method, that we set aside, 20% of all of your payments to put towards paying your taxes. If we set aside 20%, that amount for a $2,000 project would be $400.
If we take a bit of your profit first, –which is what the Profit First system does– then you also set aside another 5%, for example.
Profit First, by Mike Michalowicz
If you're not familiar with the Profit First system, please go get the book by Mike Michalowicz!
I have the link with my review of the book in my Favorites here.
That book is amazing and despite your assumptions (understandably!) it's not a dry read. He’s actually pretty funny & shares a fair bit of his own personal screw-ups! But it also explains this whole system, which includes how to set aside money for taxes, profit, expenses, and paychecks too.
Of course, the book is also super cheap because it’s not a course… and books don't cost that much!
And if you’ve already read it but are looking for a business checking account that works well with this system, check out this post too where I review a couple business checking options that are Profit-First friendly.
So go and get the book. …Highly encourage you to go get the book. …Go get the book! 😂
Back to our regularly scheduled content! 😆
Calculating your percentages
So, in order to have a ‘profitable’ business, you actually want to set aside money that you'll designate as your profit (that means the amount of money that you do not intend to spend, or that you will not need to spend).
Then, if you designate 25% (ish) towards business expenses, ––not that it's only going to cost $X to run your business for the whole year, but if you set aside a percentage towards expenses–– to save up, with every project you’ll add a bit which goes towards your expenses fund which you can pull from as you have business expenses throughout the year.
So these percentages are strategic, right?
Ultimately these four things need to equal or total 100%:
Taxes
Profit
Expenses
Owner’s Pay (what you pay yourself)
So Expenses can't be 30% of each project, and your paychecks 50%, and your Taxes 30%, and your profit 20%, etc ––obviously, totaling those percentages won’t equal 100.
So again, if you change those percentages up, those four values need to equal a hundred percent: taxes, profit, expenses, and paychecks. Work out what's important for you for each of those 4 categories, and decide what you want to save up for, then treat these columns (4 categories) like buckets where your money from each completed project/job will be allocated and also doing a job for you.
If you do that, then you can see the breakdown of what you actually get paid, factoring in those percentages.
Now let’s go back to our example!
If you're thinking about charging $2,000, depending on where you live, that might not be enough, –or it could be incredible! It depends on the cost of living where YOU are, right?
Let's say, for the sake of this example, that you’re realizing $2,000 is not quite enough because you want your paycheck for that project to be more than $1,000.
So let's change the Desired Fee to $3,000 and see what that gets us.
Suddenly we have a $90 processing fee (instead of $60 from before). We have $600 in taxes (instead of $400), $150 in profit (instead of $100), $750 in expenses (instead of $500) and $1,500 as my paycheck (instead of $1,000).
Maybe sounds better to you! If so, we’ll move on to the next piece; if not, then keep playing with those numbers until you land on something that feels better for you.
Now, if we look down here at the bottom section where it says “Finding your actual hourly rate”, which we haven't looked at yet, that website project fee of $3,000 that we just typed and the hours we think it's going to take us to do that project, they're already mapping into this bottom section.
In the template, whatever we typed up in the top section’s columns A and B, will also show up down here in columns A and B.
That hourly rate is calculated by the Desired Fee (or the price, package price), divided by the number of hours we think it will take us.
It's a really good idea, at least in the beginning, for you to keep track of how much time things actually take so that you start to see patterns and can guess more accurately. Because if you are literally saying, I can do a website project in a week, but then it actually takes you 400 hours, you're waaaaay TF off and you probably need to charge A LOT more!
Back in the template, when we changed that Desired Fee from $2,000 to $3000, it updated in the bottom section also. 🙌🏻
Then, of course, it's also mapping in the name and the hours we entered above, to give us an hourly rate of just $35.
That's, um…not bad? But if you're looking to go beyond just paying your bills, and to start traveling first class, taking month-long vacations, hitting the droolworthy six figures and beyond, ––that's going to be really hard for you to do with that kind of hourly rate.
And don’t worry, I'll show you what I mean, in just a minute!
So let's say we're going to just leave the desired fee at $3,000 for now.
Let’s add our other packages/offers now. Let’s say it takes us 100 hours for most brand and website projects, so we'll charge $4,000 for that package.
You can see the breakdown in those 4 categories/buckets, from:
$120 = card processing fee,
$800 = taxes,
$200 = profit,
$1,000 = expenses, and
$2,000 = our paycheckNow our paycheck is better, –but it also took anextra 15 hours to get that project done, and more time blocked off on our calendar where we couldn’t take on more work. So, you decide –does that feel worth it to you?
Before you officialy decide, look at the bottom section to check your new hourly rate for that service offering. How does it feel now?
homework break!
I want you to play with the numbers until you get within the realm of what you think feels good, based on whatever works best for you, in your lifestyle, wherever you live, etc. Right?
Then, we’ll move on to the next step in the process –or if you have the template, the tab at the bottom of this spreadsheet will be your next step.
Page 2: Annual Financial Goals Planning
Ready? 😃
Hopefully, you’ve just taken a few minutes to decide what your package prices are for each offer (service you provide) and now you also know your hourly rates based on those prices, –and you’re feeling good about everything so far.
Now it's time to pop over to the other tab in this spreadsheet and take a look at how this actually applies throughout the whole year.
If you have the template & you’re following along, click over to the Annual Project Planning tab, where you can see that some of those fields are already mapped in from the other spreadsheet. (Nice!)
If you’re not 100% sure what you’re looking at, anything that you put in the service package name column will show up on this page in same labeled column. And anything that you type in the new # per Year column will multiply by whatever maps in from the desired fee column you entered in the other page.
It'll calculate the rest of it for you, so you only have to play around with how many of each service you want to take on within 12 months (or each fiscal year).
Need some examples? I gotchu!
Examples:
Let's say that you're comfortable with doing about 8 website projects per year, because it’s just you, you don't have a team, etc. Maybe you can do more. Maybe you can do less, but let's just say that that number is 8 for this example.
Then your desired fee is mapped in from the other spreadsheet, so it matches. The number of websites (8) multiplied by the Desired Fee is $24,000, annually.
If you also offer other packages at other prices, go back to the other page and list them if you haven’t already, because they’ll map in here to help you calculate your annual totals.
Let’s say you also offer branding + website design, VIP days or your Design Day Intensives (or whatever you want to call them), e-commerce websites, memberships, templates, ––whatever services (or products) you actually provide/offer in your business.
If we say that you have 8 websites during the year and that annual amount isn't high enough, the question becomes what else could you add to get you up to the financial goal you had in mind?
Maybe you can also do 4 brand and website projects at $4,000 each. That would be another $16,000 annually. If you also want to try offering VIP days/Design Days and you do that at $1,000 each, and you book 1, that's another $1,000.
If you do 1 e-commerce website project at $9,000 because you know it takes 2x as long as non-e-commerce sites, that's an extra $9,000.
As you do the math and add those annual subtotals together, you can see your total annual earnings:
$24,000 (websites)
+ $16,000 (brand + websites)
+ $1,000 (VIP Days)
+ $9,000 (e-commerce)
–––––––––––
= $50,000 earned annually
That sounds decent for the average American, –until you look at the next column which is your Net.
Your Net Annual Income is essentially (in this spreadsheet at least, ––um, financial people don't come after me for using incorrect terminology, because like I said, I'm not a financial expert or an advisor. This is just how I view these terms!) is approximately half of the total that you earned, at just $26,000. Why is that?
Because only half of the earned $50,000 (or your 50%) is going to your actual paychecks bucket.
Your annual paycheck bucket is holding just $25,000 at 50%.
Your annual profit bucket is holding $1,460, at 5%.
Your annual taxes bucket is holding $10,000 at 20%.
Your annual expenses bucket is holding $12,500 at 25%.
Your annual processing fees bucket is about $1,500 at 3% (actually spent as you got paid).
When I say holding, I mean, if you practice Profit First, then you’re setting each of those percentages (of every deposit) aside to help you pay for your expenses, and taxes. You may not need all of that savings, but you might –and if you don’t have it ready, where would you get that money when the bills are due? 😬
There have definitely been years where the amount that I have set aside to pay taxes, wasn't the amount that I actually had to pay when expenses were higher, and I’d get to pocket whatever the remaining balance was after I paid my taxes. So that can happen, depending on your structure and your budgeting.
That's the whole point of Profit First's system –– to be prepared!
The Net Annual Earnings column is subtracting the totals of the Taxes, Expenses & Processing Fees columns, from your total Annual Earnings to show you the difference.
The hard truth & realistic considerations
If you want to FEEL like you made $50,000, then you actually need to charge a lot more because your annual earnings often need to be double whatever you actually want to earn in order to get the net that you want!
If you’re doing a two-week process like I am, a good rhythm to start with is 2 weeks on (a project) and 1 week off (not on a project). You WILL need a break between projects if for no other reason than to handle your own business admin stuff. Doing projects back-to-back will burn you out! You can only keep that up for so long.
If you go with that rhythm, you’re actually only doing about 2 projects per month on average, two weeks “on,” one week “off,” then you start another project before the month is over. That’s probably somewhere in the neighborhood of 12-20 projects per year, if you stick to that schedule rigidly and don’t take any vacations or time off.
So just sit with that and decide: does that feel realistic to you?
Maybe it doesn’t, so you decide to plan for just 12 (1 per month), but charge a little more? With that in mind, let’s go back to the drawing board with our example:
Let's adjust that website rate in the 1st page of the spreadsheet to $3,500 and see how that affects everything else. When we come back over the the 2nd page, we’ll see that it automatically updated.
Now our gross income for web design for 12 projects at $3,500 is $42,000. So it went up quite a bit!
If we also say that we could probably do, maybe 4 projects for brand + web design, but also want to change the rate of that… if we're doing $3,500 for web design by itself, then maybe we need to do $5,000 for brand + web. Make the change in page 1, then come back to page 2 again to see it update.
If we do 4 projects at $5,000 each, That would be another $20,000 annually (and only 16 projects for the entire year if you’re keeping up!)
If 16 projects per year feels like too many, then you just need to use this spreadsheet to figure out which service to prioritize time-wise, and then figure out what you need to charge so that you can actually earn a living while you create a manageable workload. That's all the spreadsheet is designed to do!
However, if you're looking at these numbers and you're like, 'wow, service X is obviously more profitable than service Y.’ Then you can adjust and know what you want to book more of, and what you’d prefer to do less of throughout the year.
So play with the numbers and see what they give you.
Next, how do you get to that ‘Annual Income’ goal number? It’s so big! 😰 That's your next question. Right? 😉
homework break!
So let's take another minute to play with your figures. When you’re done & you’ve reached goals that feel good to you (read: do-able, realistic, etc) then come back to walk through the very last piece with me!
Monthly & Weekly Goals
Looking at those “big” annual numbers is scary at first, I know. I’ve literally sat in your shoes and had the same fears when I first did this exercise myself!
While you were playing with your numbers during the last homework break, so was I! And I have even bigger (scarier) numbers to show you, –that will help break down the goals below it into more tangible, do-able chunks. Promise!
Examples:
Let's say I'm going to charge $4,000 for website projects, which means my paychecks for each will be $2,000.
The brand + website package will now be $5,500, and my paychecks for each of those will be $2,750.
For VIP days/Design Days, it'll only be 8 hours of work in 1 day and I'm going to charge $1,500 so my paycheck for each of those will be $750.
For e-commerce projects, ––I'm going to say, that's going to take around 120 hours and I'm going to charge a whopping $9,000 because I don't really want those projects anyway.
(BTW, I'm not an e-commerce person. If you're new around here. I've said that before. I will say it again. They're not my favorite type of project. Shipping and taxes are a bitch!)
So if I update those Desired Fees in the top section of page 1, then I can see in the bottom section that my hourly rates have increased, per offer! Great.
Then we should go over to page 2 and adjust how many of those offers we’d like to aim for throughout the year. How many of those we think we can book and manage well, without overwhelm.
If I can do brand + web in about 3 weeks, and websites by themselves in 2 weeks. Let’s say I don’t want to do more than 6 brand + web projects per year. That’s a higher desired fee and we get more gross annual income from that even though the total we’d aim to book is low.
On the VIP days, because those are only one day, I can fit in a lot more. 24 VIP days in a year is actually only two VIP days in a whole month. And if they only take you eight hours, you could probably do that if you get a lot of requests for them.
So again, the big if/or factor here is going to be, how many can you realistically perform versus how many do you think you can get inquiries for?
In the beginning, you won't really know the answer to that, so for a while, you'll just be guessing ––and that's okay!
The important part here is that you KNOW your numbers now, so you also know WHAT to market and what NOT to market to your audience, in order to work toward booking the services you want most, in order to reach your goals.
So if we can book:
8 website projects at $4,000/ea,
6 brand + website projects at $5,500/ea,
24 VIP days at $1,500/ea,
0 e-commerce websites (LOL),
…then the gross annual income will be $101,000!That means our take home pay is approximately $52,520 and you can see the breakdown for everything else in the spreadsheet.
I hear you. You’re starting to breathe loudly as you hyperventilate. 😂 ‘But Katelyn, how do I actually achieve $101,000?’
It's easy, in theory, right?
All you need to do is divide your Annual total by 12, and that gives you a goal amount to make per month. Use that goal amount to help you figure out what’s do-able, based on the number of projects you said you wanted to do in a year.
Example:
$101,000/year ➗ 12/month = $8,416.67/month.
$8,416.67 ➗ 2 = $4,208.33/every 2 weeks, –helpful if you're doing a two-week process.
$8,416.67 ➗ 4 = $2,104.17/ever week.
It seems more realistic to use a weekly goal if you charge by the week, like ‘Website in a Week’ type offers. If that’s you & what you want to do, then now you know you need to charge at least $2,100 per Website in a Week project and book 4 per month, which will be harder, for sure (so I’d charge more, instead, and book fewer of them). 😉
Or, for 2-week projects, charge at least $4,208.33 and book 2 per month!
Remember, all you have to do is play with the numbers in the yellow columns and look at what these other fields are telling you those totals are, then adjust until you see results that feel comfortable to you.
Changes are normal
These results are going to change over time! That's totally normal. I've changed my prices a lot since the beginning. I think when I first started in 2015, I was charging roughly $20-$25 an hour! 😱
Your hourly rate –whether you use that number to actually bill clients or not is irrelevant, you still need to know what it is!– is going to change over time, and it should, quite frankly.
With every project, you gain more expertise and you get better at doing the job. You learn something new, you become more efficient, and you become more proficient at it.
Over time, you’ll generally get a sense of how you can start to templatize things, which you probably couldn't do before, because with practice your work can become more predictable, as far as what you know needs to be done for most projects, what most clients want/need, etc.
If you don't know what I'm talking about, check out this post where I talk about how to templatize your projects with websites in Squarespace specifically, so you can waste less time doing the monotonous stuff that you do over and over again for every project. 😜
Where to get this Pricing Calculator template
I hope this helps you get a better idea of what your prices need to be, about how to track your time and why it matters, how that money can be set aside for taxes, expenses, and how to pay yourself.
All of the very bare-bones basics that you need to know when you start running your own business full time, and how to eventually figure out what you need to earn every month in order to reach your annual financial goals.
If you followed along, you can definitely do the math yourself, but if you’re interested in getting your hands on this template because you read this whole thing but you don't want to recreate it or do the math for yourself, –or if you're not familiar with Google sheets– I get it. I was there once too!
So, if you want your copy of it to start editing right away, you can grab it in the shop, or at the link here!
Then hop in, start editing, and figure out your pricing shit, because you’ve got to know your numbers!
