How to Price a New Service Without Guessing or Undercharging
You have a new service you’re excited to offer. You know what you want to include. You know who it can help.
And then you get to the part where you actually have to put a price on it.
Suddenly, you’re staring at a blank page wondering: Is this too expensive? Too cheap? What is everyone else charging? Will anyone actually pay this?
If you’re trying to figure out how to price a new service, the goal isn’t to find one magical number that guarantees everyone will say yes. Your price needs to make sense for your clients, but it also needs to make financial sense for your business.
Because a service that sells but doesn’t leave you enough money to pay yourself, cover your expenses, and make a profit isn’t priced sustainably.
Let’s walk through how to find a number that actually works.
Start With What It Costs You to Provide the Service
Before looking at competitors or deciding what “feels right,” start with your own numbers.
What does it actually cost your business to deliver this service?
That could include things like:
Contractor or employee time
Software
Materials
Payment processing fees
Travel
Shipping
Client gifts
Outside vendors
Other expenses directly connected to providing the service
Some costs will be obvious. Others are easy to overlook.
For example, maybe your service requires a $50 software subscription every month. If you only have five clients using that software, roughly $10 per client needs to be accounted for somewhere in your pricing.
Those little costs add up.
Pretty Penny Tip: Don’t ask, “What can I charge?” before asking, “What does this actually cost me to deliver?”
Knowing your costs gives you a starting point instead of pulling a price out of thin air.
Don't Forget to Price Your Time
Your time is a cost too.
This is one of the biggest mistakes we see service-based business owners make.
You might estimate that a service takes three hours to complete, but what about:
Client emails
Prep work
Research
Meetings
Revisions
Follow-up
Invoicing
Project management
Administrative work
A “three-hour service” can quickly become five or six hours of actual work.
Let's say you want your time to generate at least $75 per hour and the entire client experience takes five hours.
That means you already need to account for $375 of your time before considering any other expenses or profit.
And remember: what your client is paying isn't the same thing as what you're personally taking home.
Your price has to pay for the business before the business can pay you.
Build Profit Into the Price
Covering your costs is not the finish line.
Your business needs profit too.
If it costs you $500 to provide a service and you charge $500, technically you didn't lose money.
But you didn't make any either.
There needs to be room between what it costs to deliver the service and what the client pays.
That extra room helps your business:
Build cash reserves
Invest in marketing
Hire help
Upgrade systems
Handle slower months
Pay taxes
Grow without constantly feeling cash-strapped
This is why we don't love pricing based solely on an hourly rate.
An hourly rate can help you understand your costs, but your final price should take the entire business into account.
Quick Money Check
Write down:
Your time + direct costs + overhead allocation + desired profit = starting price
It doesn't have to be a perfect formula down to the penny. The point is to make sure you're considering all four pieces.
Look at Your Overhead Too
Not every expense can be tied directly to one client.
You still have expenses like:
Website hosting
Accounting and bookkeeping
Insurance
Marketing
Education
Office expenses
General software
Payroll
Professional services
Those expenses exist whether you have one client or twenty.
Your services ultimately need to generate enough revenue to cover them.
This is where business owners sometimes get confused because a service can look profitable when you're only considering the direct costs.
You might charge $1,000 for something that costs $300 to deliver and think:
Great! I made $700.
Not quite.
Some of that $700 still has to help pay for all of the expenses required to keep the rest of the business running.
How to Price a New Service Based on Value
Once you understand your costs, you can start thinking about value.
Ask yourself:
What does this service actually do for the client?
Maybe you save them ten hours every month.
Maybe you help them make a better business decision.
Maybe you solve a problem that has been stressing them out for six months.
Maybe your expertise helps them avoid an expensive mistake.
Clients aren't necessarily paying for the number of hours something takes you. They're paying for the outcome, expertise, convenience, support, or transformation attached to the service.
Something taking you two hours doesn't automatically mean it should be inexpensive.
Sometimes it only takes you two hours because you spent ten years learning how to do it well.
Your client is paying for the result, not just the time on the clock.
Should You Look at What Your Competitors Charge?
Yes, but with a big asterisk.
Competitor research can help you understand the general market, especially when you're learning how to price a new service.
But it should be information, not instructions.
You don't know another business's:
Expenses
Profit margins
Experience
Team costs
Financial goals
Service scope
Capacity
Business model
They could also be undercharging.
Copying their pricing could mean copying their financial problems too.
Instead, use competitor pricing to understand the general landscape.
Then come back to your numbers.
Pretty Penny Tip
Instead of asking:
What is everyone else charging?
Ask:
What does this service need to cost for it to make sense in my business?
That's a much better question.
Think About the Scope Before Setting the Price
Before you publish a price, make sure you're crystal clear about what is actually included.
Scope creep can destroy the profitability of an otherwise well-priced service.
Let's say you create a package assuming it includes:
One strategy call
One deliverable
One round of revisions
But clients begin expecting:
Additional calls
Unlimited emails
Three revisions
Extra deliverables
Continued support afterward
Your original price might no longer work.
Define things like:
What's included
What's not included
Number of meetings
Number of revisions
Communication expectations
Timeline
Additional fees
Clear boundaries aren't just good for your time.
They're good for your profit.
Consider Your Capacity
Here's another pricing question people don't always think about:
How many of these services can you realistically sell and deliver?
Imagine you want this new offer to generate $10,000 per month.
If you charge $500, you need 20 clients.
If you charge $1,000, you need 10.
If you charge $2,000, you need five.
None of those prices is automatically right or wrong.
But the math starts showing you what each option means operationally.
Could you comfortably serve 20 clients?
Would you need another team member?
Would fulfillment take up your entire month?
Would five higher-touch clients better fit the type of business you're trying to build?
Pricing and capacity should work together.
A profitable price isn't only about what someone will pay. It's also about what your business can sustainably deliver.
Don't Price for the Version of Your Business You Have Today
Think about where you're trying to go.
If your goal is eventually to hire someone to help deliver this service, your pricing should leave room for that.
Otherwise, you can accidentally create an offer that works beautifully while you do everything but stops making financial sense the moment you try to grow.
For example, maybe you're currently doing a task yourself and aren't technically paying another person to complete it.
That doesn't mean the labor is free.
Ask yourself:
If I hired someone tomorrow to help deliver this service, would the price still work?
That question can reveal a lot.
Test the Price Instead of Waiting for the Perfect Number
Your first price does not have to be your forever price.
Read that again.
You can launch a service, gather data, and make adjustments.
Pay attention to:
How long delivery actually takes
Unexpected expenses
Profitability
Client feedback
Demand
Your capacity
How easily or difficultly the service sells
You might discover that something you thought would take three hours consistently takes six.
That's useful information.
Or maybe demand is much stronger than expected and you're booked months in advance.
That's useful information too.
Pricing gets easier when you're making decisions based on actual business data instead of trying to predict everything perfectly before you launch.
Signs Your New Service May Be Priced Too Low
Underpricing doesn't always look like an empty bank account.
Sometimes business is booming.
A few signs to watch for include:
You're constantly booked but don't feel like you're making enough money
You're resentful about how much work clients receive for the price
One unexpected expense wipes out most of your profit
You can't afford to hire help
You regularly work outside the original scope
Revenue is increasing but cash still feels tight
You're afraid to calculate your actual hourly return
If a few of these sound familiar, you may also want to read our guide on Are You Charging Enough? 7 Signs It’s Time to Increase Your Rates.
Being busy isn't the same thing as being profitable.
And more clients don't automatically fix a pricing problem.
Sometimes more clients just create more work at the wrong price.
How Often Should You Review Your Service Pricing?
Pricing shouldn't be a set-it-and-forget-it decision.
Review your pricing periodically, especially when:
Your expenses increase
You've added more value to the service
Your team changes
Demand increases
Your experience increases
The scope changes
Your profit margins start shrinking
Even if you don't increase your prices every year, you should at least run the numbers.
Your business today probably looks different from the business you had two years ago.
Your pricing should be allowed to evolve with it.
And if your review tells you it’s time for an increase, here’s How to Raise Your Prices Without Losing Clients.
Frequently Asked Questions About How to Price a New Service
Should I charge hourly or use package pricing?
It depends on the service. Hourly pricing can make sense when the scope is unpredictable, while packages can work well when you have a clearly defined process and deliverables. Either way, make sure the price accounts for your full time commitment, expenses, overhead, and profit.
Should I offer a lower introductory price?
You can, especially if you're testing a brand-new offer. Just be clear that it's introductory pricing and know what your regular price will eventually need to be.
Don't create a temporary price that becomes impossible to increase later because clients assume that's simply what the service costs.
What if no one buys at my new price?
Don't immediately assume the price is the problem.
It could be the offer, messaging, audience, timing, sales process, or how clearly you're communicating the value.
Price is only one piece of the puzzle.
What if I'm afraid I'm charging too much?
Go back to the numbers.
Feelings are important, but they aren't particularly good pricing calculators.
If your costs, capacity, value, and profit goals support the number, that's much more useful information than the little voice saying, But what if nobody pays this?
Your Price Should Support the Business You're Building
Figuring out how to price a new service isn't about choosing the highest number you think you can get away with.
And it isn't about being cheaper than everyone else.
It's about creating a price that allows you to deliver great work, pay yourself, cover the real cost of running your business, and still have something left over.
Because the goal isn't just to sell the service.
The goal is to sell a service that is actually worth selling.
And when you understand the numbers behind your price, you don't have to wonder whether you pulled the number out of thin air.
You can confidently say: This is what it costs for my business to provide this well.
Want Help Making Sense of Your Numbers?
Pricing decisions get a whole lot easier when you actually know what your business can afford.
Inside Be Your Own Bookkeeper+, you can bring questions about your own business to the Pretty Penny team, get support understanding your numbers, and build a bookkeeping routine that helps you make decisions with more confidence.
Because you shouldn't have to guess your way through the financial side of running your business.
P.S. If you’re not already on our email list, now’s the perfect time to join. You’ll get easy, practical tips delivered straight to your inbox, so managing your business finances feels way less overwhelming (and dare we say, empowering).
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