Price Your Side Hustle: 6 Steps to Set Your Rates

Intro

Job price: 20% above a similar wage? One guide says at least. Number one shows what a 5% discount costs; easiest first. Number six: list every single cost before pricing any job.

Direct costs include raw materials, freight and the labour the work requires. Another guide adds packaging, delivery, card fees and payment gateway charges. One tax agency's list of costs names stock, raw materials and direct production costs. Count all the supplies you'll use, one guide says, down to fixtures and fittings.

Hidden costs count too: one guide says storage and insurance can add up to 30% to the cost of products. So review every cost that goes into what you offer, that guide adds. Consider all the costs involved in delivering your services, another guide says. Your price has to be higher than those costs, so each sale helps cover the rest.

Too low, one guide says, and you could be losing money on every job. One guide's example is a plumber fixing a burst pipe at a customer's home. Travel is five pounds, materials two pounds fifty, and an hour's labour ten pounds, in that guide's currency. By our count, that one job costs seventeen pounds fifty before any profit.

If practical guides like this help you, subscribe. Every step and rule in this video comes straight from the official guide pages linked below. Number five: price your own time, because the pay you take is a business cost. Setting the right price is key for a successful business, one guide begins.

Its method starts from your yearly financial goal, then your markup and your hourly rate. One guide says your operating costs should include the wages or drawings you pay yourself. Leave that out, another guide says, and you are just subsidising your customer. Even if you take money out in cash, that guide says to include a reasonable amount for your own pay in your costings.

If you're starting out, one guide's method is a similar salaried job's rate plus at least 20%. That extra covers what an employee would get, like holidays and sick leave. Another guide says a salary you pay yourself should equal what you'd pay an employee for the same work. One portal says to work out all business costs at an hourly rate, including wages, leave and taxes.

An hourly rate weighs your business costs against the time you really have, another guide explains. It's easy to overestimate your working days and hours, so remember all your leave. One tax agency's example works thirty hours a week, with four weeks of holidays a year. By our count, fifty-two weeks minus four of holidays is forty-eight, and thirty hours times forty-eight is 1,440.

Hourly pricing like this is common for service businesses and contractors, one guide says. Track how long each job really takes, one guide says, to get better at pricing and quoting. Speed has value too, another guide says. A technician who fixes a problem in two hours can charge more than one who takes two days.

Know what you're worth, one small business guide says, and the lowest price you can live with. A good price helps you pay your bills, pay yourself and make a profit, one guide sums up. Next, the running costs that every sale has to share. Number four: spread your running costs, the overheads, across the prices you set.

Overheads are fixed costs, one guide says, because they don't rise or fall with your volume. Its examples include rent, marketing and advertising, office staff and the depreciation of equipment. Another guide calls them the costs that are always there, however much or little you sell. One portal says to add your fixed overheads to the cost of each sale.

Then you add the amount you'd like to make from each sale. Another guide says to give every unit you sell a portion of your fixed costs. Another portal's checklist has four items: materials, labour, overheads and taxes. Leave a cost out, one business bank's guide says, and you could lose money even with revenue coming in.

In one guide's example, a dealership has 200,000 pounds of fixed costs a year. By our count, over eighty cars a year, each car must bring 2,500 pounds toward them. A development bank's formula adds the cost of goods, the overheads and a profit target, then divides by volume. In its example, that comes to $15 seventeen per unit.

If you work from home, one tax agency divides costs by the rooms you use or the time you work there. Its example splits a yearly electricity bill of 1,120 pounds over four rooms: 280 each. Working only one day a week from home, that share falls to forty pounds. Another tax agency's example uses a fixed rate of seventy cents for each hour worked from home.

For 1,440 hours, that example comes to $1,008. A third agency divides by area: your workspace over the whole area of your home. A fixed price, one guide says, quotes the whole job with labour, materials and overheads built in. Halfway there: your costs, your time and your overheads are now in the price.

Next, the money you set aside for tax. Number three: set money aside for tax as each payment comes in. One guide says to start putting money aside as soon as income starts coming in. Paying ahead through the year smooths your cash flow and avoids one large tax bill, one tax agency says.

Its example divides a yearly instalment by fifty-two weeks to see how much to put aside. By our count, $20,437 over fifty-two weeks is about 393 a week. In that example, the money is ready when the quarterly statement arrives. Another agency lets you pay weekly or monthly toward your next bill, so less is due at the deadline.

You can estimate your next bill there to decide how much to pay, it adds. There, two payments during the year each cover half of last year's tax. A third has you pay instalments while you earn, much like tax taken from a paycheck. None of the tax pages we read gives one percentage to set aside, so ask your own tax office.

Keep your records too: they help you track deductible costs and prepare your tax return, one agency says. Rules and rates differ where you live, so your own tax office's guide is the one that counts. Our earlier step-by-step guide to starting a business is linked on screen. Next, the margin on top, and a look at the market.

Number two: add a margin to your full cost, then check it against the market. Markup is the percentage you put over the top of your cost, one guide explains. Gross margin is the money left over to pay all the overheads. Its tyre shop example sells $52,000 of tyres that cost 31,200.

That's a 66.67% markup and a 40% gross margin. By our count, the same $20,800 is a share of cost in one and of sales in the other. So each tyre bought for $31 twenty gets a minimum price of $52. Another guide's bakery keeps $150,000 of gross profit from 450,000: 33%.

Quote for profit, not just to win the job, and add a fair margin to help your business grow, one portal says. Use competitors' prices as a guide, but don't copy them exactly. Your price should cover your costs and reflect your service's full value, that portal adds. One more guide's builder plans $500,000 of jobs and prices them for a 20% markup.

Research their price lists or ask them for a quote, another guide suggests. One small business agency asks a research question: what do potential customers pay for the alternatives? Compare what customers find valuable too, not just the price. Prices far from competitors' need a good reason, another guide says.

Value counts as well, the plumber's guide says. A leak repair that costs seventeen pounds fifty can be priced by the damage it prevents, not only its cost. A designer in one guide's case study checks others' prices and settles in the mid-range. And with lower margins all around, a much higher price could cost you sales, a development bank's guide notes.

Next, the step that keeps your price working over time. Number one: test your price and review it, because costs and markets change. Review your prices at least once a year, one portal says, or whenever your costs change. Another guide suggests about once every three months, so prices still meet your needs and your customers' needs.

A third suggests formal reviews monthly, quarterly or half-yearly. Checking your margin, markup and break-even numbers helps you spot rising expenses early, one guide says. Then test different price options to see what sells, that guide says. Another suggests testing your markup against what competitors charge, or on friends and family.

Discounts can bring in more business, but they can also cut your profit. One guide's example: at a 40% gross margin, a 5% discount needs 14.3% more sales. By our count, five divided by thirty-five comes to about 14.3%. Discount too much, and customers may see you as the cheap option, another guide says.

When you raise prices, explain why, and use it to remind customers of what you offer. If you haven't raised prices in a few years, one guide suggests reminding customers of that. Put every quote in writing with a detailed breakdown, to avoid disputes about what's included. A written quote also protects you from mix-ups and unpaid work, one portal adds.

For staged or large projects, one small business guide names upfront and partial payments for cash flow. By our comparison, the guides share one order: costs, your time, overheads, tax, a margin, then a review. A small first step: price one job with its costs, your time and its share of overheads. Each step here uses one guide's own example, so your numbers will be your own.

Which step will you work out first for your side hustle? Tell us in the comments. Rules, rates and currencies differ where you live, so check your own government's business guides. Subscribe to see the next official guides we check.

Your next step is in the video on screen now: nine official steps to start a business from home. Information only; results vary. This is Extra Income Explained.