Setting the Right Price and Valuation for a Service

Do you have a business providing services? Are you wondering how you can pick out the right price for these services to make your business a cut above the rest? If you answered yes, then you are on the right page!

Since there are many factors you should consider when evaluating the perfect prices, you may get overwhelmed. The following section will discuss some ways you can use to put the right price on your services.

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Get ideas from a similar service provider

If your services are not one of a kind, there’s a high chance that other businesses offering similar services exist. If that is the case, you can get an idea from them regarding prices. This is especially so if you provide very similar services with the same procedure and process. Remember to also perform financial statements analysis on your competitors to be sure that their pricing strategy appears to be driving a reasonable bottom-line result. There’s little value in replicating a loss-making strategy.

However, whether it’s yours or the other business’ that has less or more inclusions in your overall service, then you can just add or lessen the prices. 

Create your own 

If your service is rare or unique, then you have the liberty to decide on the prices. You can follow this list to put a tag on it properly:

  1. Identify all of your direct costs. 

This includes the equipment and other machines you use for the service, their electric or water consumption, your employees’ wages, fringe benefits, taxes, and anything else your business uses to operate. 

  1. Allocate your overhead expenses. 

After knowing where your initial capital went, you now have to allocate how your business will profit off of them. Your first consumers shouldn’t bear the cost of your initial investment and overhead expenses. You should spread it throughout your expected return on investment (ROI). This is so you don’t scare off your potential clients with high service rates, and you’ll also gradually get your capital back and cover your overheads. This is an important concept explained in the best accounting books known as absorption of overheads.

In this stage, you need to do proper research of the market and your customers. You must know the perceived value of your services and if people are willing to pay what you ask them to. 

  1. Determine a fair profit margin. 

After subtracting all of the costs you identified in the first step from your revenue, profit is what you get. This is what’ll keep your business going. Properly managing profits to upgrade and turn your services into a  stable source of income is the key to a successful business. 

Hire a professional

If you’re unsure how to get the correct prices for your services, you can always turn to professionals who know and have experience identifying business prices.  Make sure, however, that you understand their process so you don’t end up blindly depending on others. At the end of the day, it’s still your business you’re running – you need to know everything about it, inside and out, to make sure you can manage and handle it the best you can. Professionals will have read the best valuation books and be able to bring a slew of different methodologies and approaches to the task of pricing up your service.


Remember to constantly adjust your prices to reflect the competitive market and the changing costs of the products you use for your services. Determining the appropriate markup price is critical, so you don’t end up losing more than you’re earning.