Goods have a visible cost: you buy a product for 100 and sell it for 150. Services are different. What you sell is time, skill and results, and the cost is partly your own time. Many service providers underprice because they only count the hours they bill and forget the hours they do not. Setting prices deliberately, and reviewing them regularly, is one of the fastest ways to raise a service business's income.

Know what you need to earn

Start with the income you need. Add your living costs or the salary you want to draw, the business costs such as rent, equipment, software and insurance, and the taxes and contributions you will pay. This is the total revenue the business must produce. Use the freelancer tax calculator and tax for freelancers and content creators in Kenya to estimate tax.

Count your real billable time

Divide the year into working days, remove weekends, public holidays, leave and sick days, then remove time spent on admin, selling, learning and unpaid gaps. What remains is your billable time, often only half of the total. Divide the revenue you need by the billable hours to get the minimum hourly rate that keeps you afloat. Many people are shocked by how high it is.

Choose a pricing model

Several models work for services:

  • Hourly rates are simple and fair for uncertain work, but they reward slowness and make clients worry about the total.
  • Fixed prices per project suit work you can define; they reward efficiency but need a clear scope.
  • Retainers are monthly fees for ongoing access or work; they smooth your income.
  • Value-based pricing links the price to the result for the client, such as savings or revenue; it requires understanding the client's business.

Use a mix. A fixed price for a defined project, an hourly rate for extras and a retainer for regular clients is common.

Research the market

Look at what others in your field charge for similar work, in your area and online. Do not copy blindly, but know the range. If you are far below the market, clients may doubt your quality; if you are far above, you need to justify it with results, experience or specialisation.

Add VAT and tax correctly

State whether prices include VAT. If you are registered, add VAT to your quotes and issue proper invoices; the VAT calculator and VAT invoices and quotations: what to include help. If your clients are companies, they may withhold tax from your fees; agree whether your price is before or after withholding. See withholding tax in Kenya explained and how tax changes affect your contracts and prices. If you pay turnover tax, test your position with the turnover tax calculator.

Write clear proposals

A good proposal states the scope, deliverables, timeline, price, payment schedule and what is not included. Clear boundaries prevent unpaid extra work. Ask for a deposit for larger projects, and agree milestones. How to price your products and services in Kenya gives more on structuring prices.

Handle discounts and negotiation

Decide in advance how far you will go. Give discounts in return for something, such as a longer commitment or faster payment, not just because someone asks. Never discount below your minimum rate. If a client cannot afford your price, offer a smaller scope instead of a lower rate for the same work.

Track your time and profit

Record how long each job takes and compare it with what you quoted. You will learn which kinds of work are profitable and which are not. The break-even and pricing calculator helps you check that your prices cover your costs.

Raise prices regularly

Costs rise, and your skill grows. Review your prices at least once a year and raise them for new clients first, then for existing ones with notice. A modest annual increase is usually accepted. If nobody ever objects to your price, it is probably too low.

Collect on time

A good price is worth little if clients pay late. Invoice promptly, set payment terms and follow up; see invoicing and getting paid on time and how to collect late payments from customers. Pricing is a skill you improve by testing, measuring and adjusting, and it pays back every month.