Establishing your hourly service rate is a simple process of adding overhead and expected profit to the cost of labor. That is, if you want to pay yourself $15 per hour and a benefits package worth $5 per hour, add to this your overhead, say $5 an hour, and your expected profit, such as 20 percent of the labor/benefits/overhead cost—or $5. You come up with a total of $30 per hour. You then apply this hourly rate to the work you do.

Let’s look at how many successful businesses price their products and services: The first step is to determine what type of price you will set. That is, are you pricing a product that others will sell to the consumer or are you pricing a service that you sell directly to the user?

A retailer is someone who sells a product to the ultimate or final consumer. The retail price is simply the price at which it is sold to the consumer. A wholesaler is someone who sells the product to the retailer at the wholesale price. A manufacturer is someone who makes the product and sells it to the wholesaler, the retailer or directly to the consumer.

To set the price of your product or service you need information about the cost of materials, the time required to make the piece, the cost of overhead and the amount of profit you should reasonably expect. Let’s look at these components in brief.