Undercharging is one of the most common — and most damaging — habits women fall into when they start a business.
It feels safer. It feels more likely to get clients. But pricing too low does not just cost you money — it costs you sustainability.
Here is exactly how to price your services with confidence.
Service vs Product Business: Know Your Model
A service business sells your time and expertise. A product business sells a physical or digital item.
The pricing approach is different for each. In a service business, your price is built around your time and value. In a product business, it is built around unit economics — what it costs to produce one item versus what you sell it for.
Most female entrepreneurs starting out are running service businesses. That is where we focus here.
💰 How to Calculate Your Hourly Rate
Your rate is not a number you pick because it sounds fair. It is a number you calculate.
- Start with your desired annual income — what you need to cover life and business costs
- Add your business expenses — software, insurance, accountant, tools
- Estimate your realistic billable hours — around 1,200 per year is a solid baseline (25 hours a week, 48 weeks)
- Divide your total by billable hours — that is your minimum viable rate
Example: £40,000 needed ÷ 1,200 hours = £33.33 per hour minimum.
⚖️ Hourly Rate vs Flat Fee
Hourly rate works well for ongoing or unpredictable work. Flat fee works well when scope is clear and defined.
Flat fees reward your efficiency — if you complete a project faster because you are experienced, you earn more per hour without the client feeling it. Just make sure your scope of work is in writing before you start.
🧾 VAT Thresholds: What You Need to Know
In the UK, the VAT registration threshold for 2025/26 is £90,000 in taxable turnover over a rolling 12 months.
- Below £90,000: no obligation to charge VAT
- Above £90,000: you must register and charge 20% VAT on most services
- Below the threshold but with VAT-registered business clients: voluntary registration may be worth it
📈 Profit and Loss: The Number That Actually Matters
Revenue tells you what came in. Profit tells you what you kept. Those are very different numbers.
A basic profit and loss tracks your income, subtracts your direct costs and overheads, and shows you your net profit. Update it monthly. It takes 20 minutes and it changes how you make decisions.
Final Thought
Charging what you are worth is not arrogance. It is how a business survives.
Know your costs. Build your rate. Choose the right pricing model. Understand your VAT position. Read your profit and loss. That is the system.
Want to go deeper on this?
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