How to price a product or service


The simplest way to price a product or service is to work out your day rate and then add costs and your profit on top.

Using a day rate as a basis to price your product or services ensures that you get paid your worth. Then add on your costs for products/materials/rent/overheads etc and finally add on any additional the profit that you want to make (on top of your day rate).

How to work out your day rate

Decide how much you want to earn over the year (your salary) before tax.

Work out how many days you are going to work over the year. A common number to use is 220 days, which is 44 weeks a year, which is 8 weeks per year out of your business (holidays, bank holidays etc).

Take your salary and divide it by the number of days that you’ll work in the year.

How to work out your daily costs

If you use accounting software such as Xero, you can run a quick report to see your outgoings and costs – you can even break these down to see costs for each product (if your xero has been set up with tracking codes).

If you don’t have software then download your bank statement and note down your expenses. You’ll likely have a mix of one off / annual expenses (like business insurance), monthly expenses (like phone bills) and in some cases weekly expenses (like postage).

You now need to work out your daily expenses so that you can add it on to your day rate (above).

⭕️ For one off/annual expenses, divide the cost by the number of days that you will work.

⭕️ For monthly expenses, times them by 12 and then divide by the number of days that you will work.

⭕️ For weekly expenses, times them by 52 and divide by the number of days that you will work.

How to price your product or service

To get a base price for your product or service, add together your day rate and your daily costs. This number is the minimum amount you need to charge per day to earn the money you want to earn (before tax).

You can play about with the numbers, increase or decrease the numbers of days that you can work and see how that affects the base price. Add on a profit percentage and see how that affects your price. Compare with competitor pricing to see how / where you will sit in the marketplace. If you have a top end brand, your pricing needs to sit at the top end. Equally if you are offering bargain products, then your pricing needs to reflect that.

If you are product based, factor in the time that it takes for you to make/manufacture/sell a product. Then think about how many products can you make in a day and how many products can you sell in a day.

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How to price a product or service

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Green Zebra are Xero Accountants and Business Advisors, specialising in Xero Software. We offer services such as Limited Company Annual Accounts, Personal Tax Returns, VAT, HMRC Administration, Director Self Assessments, Cashflow forecasting and Profit strategies coupled with Business Growth advice.

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