A practical guide

How to price a product or service

Work out what one sale costs you including your own pay, then set a price between that floor and what the result is worth to the customer.

Published November 3, 2026 · Luke F. Walton

Start with what one sale costs you, including your own time. That number is your floor. Then look at what the customer pays for alternatives today and what the result is worth to them. Your price goes somewhere above the floor, and the other two numbers tell you how far.

The first price is a guess you test, not a verdict on your worth. This guide covers how to make the guess well, how to price services and products, and how to change it later.

What does one sale cost you?

Add up everything you spend to deliver one unit: materials, payment fees, fuel, packaging, and the time it takes you. Include time even when you are the only worker.

Take a smoked-fish market stall. One package costs $12 to make. That is the fish, salt, wood, packaging, and the share of the stall fee that one package carries, plus 20 minutes of your time at $18 an hour. If you sell it for $12, you have covered your costs and paid yourself nothing.

What is the difference between markup and margin?

Markup is profit as a share of cost. Margin is profit as a share of price. They use the same profit and a different base, so they give different percentages.

Use the stall package. Cost is $12 and the price is $18. Profit is $18 minus $12, or $6.

• Markup: $6 ÷ $12 = 50 percent.
• Margin: $6 ÷ $18 = 33.3 percent.

A 50 percent markup is a 33 percent margin. The two only match at zero.

The mix-up costs money in one direction. Say you want a 50 percent margin, and you mistakenly add 50 percent to cost. You price at $18 and earn a 33 percent margin. To get a true 50 percent margin, price is cost ÷ (1 − 0.50), or $12 ÷ 0.50 = $24. That is a markup of $12 ÷ $12 = 100 percent.

The pricing calculator takes a price and a cost and shows both, or converts one into the other.

What are the three anchors for a price?

Three numbers frame a price: your cost, what alternatives cost the customer today, and what the result is worth to them. The lowest of the three is a floor. It is not a target.

Take a clinic-scheduling consultant. These figures are illustrative.

• Your cost: a project takes 40 hours. At $50 an hour for your time, that is $2,000.
• The alternative: the clinic could hire temporary front-desk help for a month at $6,000.
• The value: if fewer missed appointments is worth $15,000 a year to the clinic, that is the size of the result.

Your cost is the lowest, so $2,000 is the floor. A price of $4,500 sits above your cost, under the alternative, and far under the value. The customer sees a clear saving, and you earn more than your time.

How do you price a service?

You can price a service by the hour, by the job, or by the result. Pick the one that matches how well you can predict the work and how clearly the customer can see the outcome.

By the hour fits work where the scope is unknown, such as ongoing support or a repair where the problem is hidden. The customer carries the risk of the job running long, so expect them to ask for an estimate. The guide on how to set your hourly rate shows how to build the rate so it covers non-billable time.

By the job fits work you can scope. A mobile bike repair service might charge a set price for a tune-up. The customer knows the cost up front. You carry the risk of the job running long, so use your first few jobs to learn how long it really takes.

By the result fits work where the outcome is clear and worth a lot, like the scheduling project above. You price from the value anchor, not from your hours. It takes more confidence and more proof, and it pays best when you can show the result in numbers.

How do you price a product for a stall or for wholesale?

At a stall you set the retail price, and you keep the whole difference between price and cost. Wholesale means selling in bulk to a shop that resells, so your price has to leave the shop room to make its own margin, and you earn less per unit.

Back to the $12 package. At the stall it sells for $18, so each sale leaves $6. A shop wants to resell it, so you offer it at $15. Each sale leaves $3.

To earn the same $6 profit, you need two wholesale sales for every one at the stall. That can still be a good deal. Wholesale saves you standing at the stall, and one order may move many packages at once. But it only works if the volume is real, and if your costs hold at that volume. Work out the volume before you agree.

That is where break-even comes in. The SBA notes that finding your break-even point helps you price smarter. Put your price, your cost per unit, and your monthly fixed costs into the break-even calculator to see how many sales you need. The guide on how to calculate break-even explains the steps. If the number of sales looks out of reach, the price may be too low.

How should you price for your first customer?

Treat the first price as a test, not a commitment. Say it out loud, watch what happens, and adjust.

If everyone says yes without a pause, the price may be low. If nobody says yes and they tell you why, the reasons are useful. If a few say yes after thinking it over, you may be close.

The guide on how to get your first customer covers asking for a real commitment, such as a deposit. A deposit tells you more about price than praise does. Tell people the price is an introductory one if it is, and say when it changes. Do not apologize for it.

How do you raise prices later?

Raise prices for new customers first, give existing customers notice, and expect to lose fewer people than you fear. Check the arithmetic before you worry.

Say a job earns you $30 after costs at a price of $90. You raise the price to $99. The job now earns $39, assuming your costs stay the same. You can lose some customers and still earn the same total. $30 ÷ $39 is about 77 percent, so you can lose up to roughly 23 percent of your volume before you are worse off. Most price rises lose far fewer.

What mistakes should you avoid?

Three mistakes show up again and again.

Copying a competitor’s number. You do not know their costs. They may own their equipment, work from home, or lose money on purpose. Their price tells you what customers see, not what works for you.

Forgetting your own pay. If the price covers materials but not your time, you have a hobby that costs you hours. Put a wage in the cost before you set the price.

Undercharging to be chosen. A low price attracts people who shop on price, and it leaves no room to deliver well. It also makes a later rise harder. Win on being clear, quick, and good at the work.

Where to go next

Start by running your numbers through the pricing calculator. If you sell your time, read how to set your hourly rate. When you have a price, try it on a real person with how to get your first customer.

Common questions

Should I put my prices on my website?

It depends on how standard the work is. A set-price service or product usually benefits from a posted price. Custom work may be better served by a starting price or a short conversation.

What if my price is higher than the competition?

That is fine if the customer can see why. Explain what you do differently and what the result is worth. If nobody pays the higher price after real conversations, the market is telling you something.

Is it wrong to charge friends and family less?

No, but name it as a discount so you know what you are giving. A friend price that you never wrote down tends to become the price.

What if I do not know my costs yet?

Estimate from the first few jobs and keep notes on time and spend. Your numbers get better after a handful of sales. Raise the price if the real cost comes in higher.

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