Financial Freedom Friday
Learning how to set profitable prices is one of the most important skills you can develop as a business owner. Too often, new entrepreneurs base their rates on what competitors charge or what feels “reasonable,” rather than what will actually sustain their business. I made that mistake in the early days of Backbone America—choosing numbers that felt safe instead of ones that reflected the true value and costs. The result wasn’t just lower income; it was a cycle of self-doubt that kept me stuck—and often attracted individuals who weren’t my target. When you learn to set profitable prices with intention, you create stability and freedom in your business instead of leaving them up to chance.
The Hidden Danger of Guesswork Pricing
Here’s a simple example. Imagine you charge $100 for a service that takes five hours to deliver. Out of that, maybe $40 goes toward tools, software, and other overhead. That leaves $60. Divide it by five hours, and your actual hourly rate is only $12—before taxes. That’s below what many people could earn in a part-time job with no responsibility. When I first ran the numbers on my own work, I had that same sinking feeling. What looked like income on paper was barely covering costs in reality.
Guesswork also feeds guilt. If you’re unsure whether your pricing is fair, you may find yourself lowering it further just to avoid rejection. I’ve done this—dropping rates before a client even asked, just to make the sale. The short-term relief was always followed by regret. That cycle keeps businesses small and fragile because you’re constantly trying to make up for lost margin with more work.
The danger isn’t just financial; it’s psychological. Underpricing makes you resent your work and resent your clients, even though they’re not the ones setting your rates—you are. And over time, that resentment erodes the very freedom you started your business to build.
And here’s the part many people miss: underpricing doesn’t just hurt you, it hurts how others perceive you. A few weeks back, I was looking for a freelancer to rebrand some material. He looked good on paper, but when he quoted me a rate it was extremely low. My reaction wasn’t excitement—it was worry. Would he actually put the time into doing what I needed? Would I end up with something fast and sloppy that I couldn’t use? What if I needed revisions? Instead of making me want to hire him, the low price made me doubt the quality altogether.
What It Really Means to Set Profitable Prices
So what does it actually mean to set profitable prices? At its core, it means building your rates backward from the outcome you need, instead of forward from what you think people will pay. Profit isn’t a happy accident—it’s something you design into your numbers.
Here’s a simple way to think about it:
Start with your desired take-home pay. How much do you want to earn after expenses and taxes? For example, let’s say your goal is $80,000 a year.
Add in business expenses. These might include software subscriptions, marketing, contractors, or even the cost of your laptop. Let’s estimate $20,000. That brings your required revenue to $100,000.
Factor in taxes. If you assume 25% for simplicity, you’ll need closer to $125,000 in revenue to keep that $80,000 goal intact.
Divide by your realistic capacity. How many billable hours or units can you actually deliver without burning out? If you can comfortably sell 1,000 units or hours a year, that means your minimum profitable rate per unit is $125.
That’s your profit floor—the point below which your business stops being sustainable. And if you’re charging less than that, you’re not just cutting into your income—you’re cutting into the freedom you’re working so hard for.
When I first sat down to do this math for my own work, it was eye-opening. I realized the rates I had set early on weren’t based on any kind of sustainability. They were based on fear—fear that if I charged more, no one would buy. But once I saw the numbers clearly, the fear started to fade. Because now I wasn’t just asking for “more,” I was asking for what my business actually needed to survive.
What surprised me even more was when I looked beyond salary to the benefits my job was providing. Free healthcare insurance, a pension co-sharing plan, retirement matching, stipends, and more—all of that had a price tag I had never really factored in. If I wanted my business to replace my job, I couldn’t ignore those hidden costs. Seeing the real value of those benefits made it clear that profitable pricing isn’t just about keeping the lights on—it’s about protecting the lifestyle and security you want to maintain.
That’s the key difference between guessing and intention. When you set profitable prices with intention, you’re not gambling—you’re building. You’re treating your business like a business, not a hobby.
Breaking Free from Pricing Insecurity
Even after you run the numbers and see what it truly takes to keep your business sustainable, a quiet voice often creeps in: “But will anyone actually pay that?” That’s pricing insecurity—and left unchecked, it can quietly sabotage your business.
Pricing insecurity usually shows up in two ways: comparison and fear. Comparison happens when you see others in your space charging less, and you second-guess whether your rates are too high. Fear shows up when you imagine a client’s reaction to your price—assuming they’ll say no—so you lower it before they even have the chance. I’ve been there. I’ve cut my own price mid-conversation, thinking it would make the decision easier for the other person. But instead of feeling like I’d won a client, it left me feeling like I’d undervalued my own work.
Here’s the truth I had to learn: setting profitable prices isn’t overcharging—it’s responsible. It’s what allows you to do your best work without running yourself into the ground, and it’s what keeps your business strong enough to serve people long-term. If you’ve ever worked in a corporate job, you’ve seen this in action. Big companies don’t hesitate to build profit into their prices. They don’t worry about whether people will pay—they set the numbers required to cover overhead, salaries, and growth, and the right customers pay it.
The same applies to us. When you set profitable prices, you’re not asking someone to “take a chance” on you—you’re communicating that your business is built to last. Ironically, pricing too low often creates more doubt. I experienced that firsthand with the freelancer who quoted me far under market value.
I experienced that firsthand with the freelancer who quoted me far under market value. Though his profile drew me in, his quote gave me hesitation. So I asked: why is the quote so low? Did he not understand the requirements? I wasn’t looking to pay more than I had to, but I did want quality—work that met my standards and expectations. His number didn’t align with the amount of time it would take, even for someone highly experienced, to complete the job well.
His answer was simple: he really needed the work. That spoke volumes. He wasn’t quoting based on the value of his expertise—he was quoting from a place of desperation.
That’s the risk with pricing from insecurity: instead of attracting the right clients, it leaves them questioning whether you can actually deliver what they need.
A Real-World Lens: Why Big Companies Always Price for Profit
Take airlines, for example. They don’t pull numbers out of thin air. Pricing is calculated to cover fuel, staff, aircraft maintenance, airport fees, and still leave room for profit. The same goes for retailers: when you walk into a store, you don’t see a price tag that reflects “what they hope you’ll pay.” You see a carefully structured price that ensures the company’s costs, payroll, and growth are all covered.
This aligns with insights from Harvard Business Review, where Marn and Rosiello explain that the right price—especially one grounded in strategy—can drive profit faster than chasing volume ever will. “A 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1%.” That’s pricing as a powerful tool, not a gamble.
That lesson applies to solo entrepreneurs just as much as it does to corporations. Your business may be smaller, but the principle is the same: if you don’t set profitable prices intentionally, you’ll spend more time trying to stay afloat than building the freedom you started your business for in the first place.
Action Steps to Set Profitable Prices Today
Knowing you need to set profitable prices is one thing. Putting it into practice is another. The good news? You don’t have to overhaul everything at once. A few intentional steps can shift your pricing from guesswork to clarity:
1. Run the numbers for one offer.
Don’t start with your whole business—pick a single product or service. Map out your costs, your time, and the revenue you’d need for that offer to be profitable. Even this one exercise can be eye-opening.
2. Establish your profit floor.
Once you know your baseline, decide the absolute minimum you’re willing to charge. This isn’t about padding your price—it’s about protecting your business. Anything below this line drains your freedom rather than builds it.
3. Reframe the conversation.
Instead of leading with “what people will pay,” lead with “what my business needs to stay healthy.” That shift takes the pressure off you personally and places it on the system you’ve built.
4. Test and adjust intentionally.
Profitable pricing isn’t set in stone. If clients balk, don’t automatically slash your price—look at how you’re communicating value, who you’re targeting, and whether your offer is positioned correctly. Sometimes it’s not the number that’s the problem, it’s the story behind it.
Remember—every price you set is a statement of how much you value your work and the freedom you’re building. Choose numbers that affirm both.
Your Freedom Is in the Numbers
Setting profitable prices isn’t about squeezing every dollar from your clients—it’s about building a business that actually works for you. The moment you stop guessing and start pricing with intention, you trade insecurity for clarity, and fear for freedom.
Your next step doesn’t have to be big. Pick one offer, run the math, and set a profit floor. That single act shifts your business from survival mode into a model that can grow.
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