This is how you determine your sales price without selling yourself short – The Happy Financial

You work hard, deliver quality and want to earn a good income. Yet many self-employed people struggle with determining their sales price. If you ask for too little, you don’t earn enough. If you ask too much, customers will drop out. In this article you will learn how to determine a healthy sales price: one that does justice to your work and yields a profit.

The problem: charging too low

Many self-employed people start enthusiastically, but base their price on what appears to be ‘in line with the market’. That often means: what the competitor asks. Only: your costs, experience and goals are unique. If you do not consciously calculate your sales price, you run the risk of working below your cost price and no one can sustain that for long. The solution lies in insight: what does it really cost you to deliver?

The rules and percentages you need

To arrive at a fair sales price, start with the basics: your costs. Consider fixed costs (such as insurance, software, rental) and variable costs (such as materials or travel time). You then add your desired net profit. Don’t forget that you also pay taxes: income tax and the Healthcare Insurance Act (ZVW) contribution. You can reserve about 35 to 40 percent of your profit for this.

Tip: do you want to know what income tax you really need to reserve? You will know this quickly and easily with the ‘set aside for your taxes’ template.

Make sure that you communicate the prices including VAT if you supply to private customers. In the business market, stating prices excluding VAT is common. Make sure that you indicate what percentage VAT you should charge. In the Netherlands, the general rate of 21 percent applies to most services and products. Do you supply certain products or cultural services? Then the reduced rate of 9 percent can apply. Always check which rate applies to your situation.

Practical example: from cost price to sales price

Suppose you are a graphic designer and want to keep € 3,500 net per month. You work 1,000 billable hours per year. Your fixed and variable costs amount to € 10,000 per year.

Calculation:

• Desired net profit: €3,500 x 12 = €42,000
• Costs: €10,000
• Total to be earned: €52,000
• Add 40% tax reserve: €52,000 / 0.6 = €86,667
• Sales price per hour: €86,667 / 1,000 = €86.67 ex VAT

With this rate you can pay yourself a good income and reserve it for taxes and buffers.

Moreover, you know: if you go below this rate, you will fall short at the end of the year.

Tip: with the template ‘determine hourly rate self-employed’ you can easily calculate this hourly rate.

Common mistakes in pricing

A common mistake is calculating hours that are too optimistic. Many self-employed people assume 1,600 hours per year, while they can only actually invoice 1,000 to 1,200 hours. The rest is spent on administration, marketing and acquisition. Many entrepreneurs also forget to include their vacation days, illness and investments in their calculations.

A second mistake: lowering the price to attract customers. That seems smart, but it can weaken your position. Customers who buy mainly based on price are rarely loyal. So dare to charge what you are worth: that radiates professionalism.

Step-by-step plan to calculate your sales price

Use this step-by-step plan to determine your own price:

1. Map out all your costs. Both fixed and variable costs.
2. Determine how much net you want to keep. What do you need to live well?
3. Calculate your total hours. Be realistic about your billable hours.
4. Add your tax reserves. Charge 35–40% tax.
5. Add a margin or buffer. For risks, investments or growth.
6. Check the market. Use competitors for reference only, not as guidance.

Summary checklist

• Have you included all costs?
• Do you know how many hours you can really invoice?
• Have you charged tax and VAT?
• Is your margin sufficient to invest?
• Does the price match your desired lifestyle and goals?

Use a handy template

With the Template: Calculate the correct hourly rate from The Happy Financial you can calculate in just a few minutes the minimum amount you should charge for your product or service. You enter your costs and hours and immediately gain insight into the optimal price. This way you avoid charging too low and build a financially healthy company.

CTA: Don’t leave money on the table

Your time and expertise are valuable. By calculating consciously, you not only work more profitably, but also with more peace of mind. Do you want more insight into your total financial picture as an entrepreneur? Then also view the Starter Bundle with useful tools and e-books to start your business on a strong financial footing.