Stuck on a quote? Work backwards from the life your business needs to pay for, and find a baseline rate you can trust. Worked example included.

When I started my headshot photography business, my pricing strategy was very sophisticated. I looked up what the other photographers were charging, and then I charged less.

That was it. That was the whole strategy.

It held up right until actors and models started booking me. Then I realised I had no idea whether I was making any money, or how on earth to put my prices up.

If you run a service business, you’ve probably had your own version of this moment. A new enquiry lands for something a bit like your last project, but with a twist, and you sit staring at a blank quote trying to guess a number that won’t scare them off.

So here’s the method I wish someone had handed me back then. You work backwards. Start with what your life costs, add what you owe the taxman and your future self, then divide by the days you can actually bill. The number you land on is your baseline rate, and every quote starts from there.

Where should you start when setting your rates?

With your own bills. Most pricing advice starts with the market, but I’d start at your kitchen table.

How much do you need each month to keep your life running exactly as it is today? Rent, bills, the weekly shop, the odd dinner out.

Keep this number grounded in the life you have right now. The dream-life number comes later, and it’s much more fun to plan once the basics are covered.

How do you work backwards to find your rate?

Your rate gets built in layers, and each one stacks on top of the last.

→ Tax and insurance. Work out roughly what you’ll earn this financial year (or what you’re aiming for), then check which tax bracket that puts you in and what National Insurance you’ll owe. Set it aside before you spend a penny. That money was never really yours, and treating it that way saves you a very unpleasant January.

→ Your pension. Nobody is going to skim a slice off your salary and tuck it away for your retirement any more. That job is yours now. A SIPP (Self Invested Personal Pension) is one way to do it, so decide what you can comfortably pay in each month and treat it like any other bill. Future you will be delighted.

→ Your expenses, business and personal. What do you absolutely have to cover each month to keep the lights on, at work and at home? Add a little extra for a rainy-day pot, because business has a lot of weather.

→ And finally, you. What do you want to pay yourself so you can actually enjoy your life? Holidays, and closing your laptop at 6pm without a flicker of guilt. This is the layer founders forget, and it’s the whole reason you’re doing any of this.

Add the layers together and you’ve got your target for the year. Divide it by the number of days you can realistically bill (be strict, and only count the days clients will pay for), and there’s your baseline rate.

What does this look like with real numbers?

Here’s a made-up example so you can see the maths in action. I promise it’s gentle. Swap in your own figures as you go.

Say that every month you need to:

→ cover £2,300 of business and life expenses

→ set aside £1,400 for tax

→ put £300 into your pension

→ pay yourself £1,000 of fun money on top

That’s £5,000 a month, or £60,000 a year.

Now, say you can bill 180 days a year once holidays and admin are taken out. £60,000 divided by 180 is roughly £333 a day. If you work on an hourly basis, divide the day rate by the numbers you can realistically work during the day and week, and keep that as your hourly rate. In this case, if you can work 8 hours a day, your day rate would be roughly £42.

That’s your floor.

So when that slightly-different project lands in your inbox, you’re no longer plucking a number out of thin air. You work out how many days it’ll take, multiply, and adjust from there. Bigger scope, more days.

And if a client you’d love to keep genuinely can’t stretch that far, you can offer a discount knowing exactly what it costs you. I’d usually rather do that than lose a good relationship over a few pounds.

Whatever number you land on, put it in writing with clear payment and cancellation terms. Working for free is not a pricing strategy.

What happens when you don’t know your numbers?

One founder I worked with came to me with no pricing strategy at all. She didn’t know what she was earning or what to set aside for tax and her pension, and she had no contracts or payment terms in place. She also couldn’t switch off, let alone take a holiday.

None of that was a character flaw. There was simply no structure underneath the business yet.

I know that feeling, because I’ve been there. These days I plan my week, I know my numbers, and I close my laptop at 6pm without worrying about what I’ve forgotten.

What I learned the hard way

Back to those headshots. Undercutting everyone made some sense at the very start. I was brand new and my confidence was somewhere around my ankles, so charging less felt like the polite thing to do.

The trouble arrived with the bookings. More clients came through the door, and I was still charging my nervous beginner’s rate. I didn’t know what I wanted to earn, let alone how much to put aside each month.

So I went looking for answers in books. Profit First by Mike Michalowicz and Money: Master the Game by Tony Robbins were the two that landed, and both hammered home the same idea: decide on your numbers first. Without them, your prices are just vibes.

There’s a mindset side to this too. Believing you’re worth a rate matters almost as much as the rate itself, and having the maths behind you makes that belief a lot easier to hold.

What’s the biggest pricing mistake to avoid?

Setting a 6-figure goal in your first year. The internet is full of people who made 6 figures in 6 weeks, and a lot of it is like old Hollywood: glamorous from a distance, but held up with cardboard at the back.

Pick a goal that fits what you actually need to spend and save each month. You can always raise it later (and you will).

Frequently asked questions

How many days a year can I realistically bill? Fewer than you’d hope. Holidays, admin, sales calls and the odd quiet week all nibble away at it. Start with a cautious number and adjust once you’ve got a few months of real data.

Should every client pay the same rate? Your baseline stays put. What moves is the number of days a project takes, so a bigger or fiddlier job simply costs more.

Should I ever offer a discount? Sometimes, yes. If a client you’d love to work with genuinely can’t stretch to your rate, a discount is usually a better call than losing the relationship. Knowing your baseline means you know exactly how far you can go. (Free work is a firm no from me, though.)

Do I need an accountant for this? You can do the rough maths yourself with a calculator and a cup of tea. A good accountant will check the tax part, which is the bit most people get wrong.

The bottom line

Next time a quote has you frozen, start at the end. Work out the life you want your business to pay for, peel back everything you owe and spend, and you’ll find the number you need to charge.

Your prices should pay for a life you actually want to live. Everything else is maths.

If you’d like somewhere tidy to keep these numbers, grab my free Notion finance template here.

And if the real problem is that you can’t see what’s coming in and going out of your business at all, that’s an operations problem. It’s also very fixable, and it happens to be exactly what I do (hello! 🙋‍♀️). Just book a Free Ops Audit and we can chat through some options.

About the author

Jagoda Puczko is a business operations partner who helps growing founders close their laptop at 6pm. She has run operations for teams of 100+ at Apple and Little Dot Studios, directed award-winning films, and once had a headshot photography business with a very sophisticated pricing strategy.

This article shares personal experience and general guidance. It isn’t financial advice.