How to Price Your Products and Services as a One-Person Business

You started your business because you're good at what you do. But how do you decide what your work is actually worth?

Maybe you bake cakes, create handmade products, offer beauty treatments, take photographs or provide a local service.

You've spent time developing your skills, buying equipment and building something you're proud of.

Then a potential customer asks:

"How much do you charge?"

And suddenly, pricing feels like the hardest part of running your business.

Charge too much, and you worry customers will go elsewhere.

Charge too little, and you risk working long hours without earning enough to make the business sustainable.

Here's the important thing:

Good pricing isn't about choosing the cheapest number. It's about understanding your costs, valuing your time and setting a price your business can realistically sustain.

Let's break down how to price your products and services when you're running a business on your own.

1. Start by Understanding Your Real Business Costs

One of the biggest mistakes new business owners make is pricing something based only on the cost of materials.

Imagine you run a small cake business.

You spend £12 on ingredients and sell a cake for £30.

At first glance, that looks like £18 profit.

But what about everything else?

• Cake boxes and packaging.
• Electricity and other utilities.
• Equipment and maintenance.
• Payment processing fees.
• Delivery or travel costs.
• Marketing and website expenses.
• The time spent preparing and decorating the cake.

Your ingredients are only one part of the cost of running your business.

Example: The real cost of a cake

Expense	Example cost
Ingredients	£12
Packaging	£3
Utilities and consumables	£2
Other allocated business overheads	£3
Total cost before labour	£20

Illustrative figures only.

If you sell the cake for £30, you have £10 left before accounting for your own labour and any further costs.

That's why it's important to understand your full cost base.

Local Finds tip: Make a simple spreadsheet listing every cost involved in creating and selling your product or delivering your service.

2. Put a Value on Your Time

When you're running a one-person business, you're often doing several jobs at once.

You're the person creating the product.

You're answering customer messages.

You're managing social media.

You're organising orders.

And you're handling the finances.

But many owners forget to account for their own time when setting prices.

Example: A handmade product

Imagine a product costs £15 in materials and packaging.

It takes two hours to make.

You want to allow £15 per hour for your work.

That means:

• Materials and packaging: £15
• Labour allowance: 2 hours × £15 = £30
• Total before other overheads and profit: £45

Selling it for £35 wouldn't even cover those assumed costs.

Of course, your target hourly rate will depend on your skills, experience, market and business model.

The important thing is to recognise that your time has a cost, even when you're working for yourself.

Also remember that not every hour is billable. Time spent on administration, marketing and enquiries needs to be considered when planning your overall pricing.

3. Understand the Difference Between Revenue, Profit and Take-Home Pay

This is especially important for new business owners.

Revenue is not the same as profit. And profit is not necessarily the same as money you can personally spend.

Revenue is the money your business earns from sales.

Profit is what remains after deducting relevant business costs.

Your personal take-home amount depends on how your business is structured, tax obligations and what you withdraw or pay yourself.

Simple example

Imagine your business makes £2,000 in sales during a month.

Your business expenses total £1,200.

That leaves £800 in profit before considering any further adjustments or taxes.

It doesn't automatically mean you have £800 available to spend personally.

You may need to set money aside for tax, future stock purchases, equipment or unexpected costs.

A business can generate plenty of sales and still struggle financially if its prices don't cover its costs.

4. Choose a Pricing Method That Makes Sense

There isn't one perfect pricing method for every small business.

Different approaches work for different products and services.

Cost-plus pricing

This involves calculating your costs and adding an amount to cover profit.

For example:

• Total product cost: £40
• Add a 25% markup on cost: £10
• Selling price: £50

Be careful not to confuse markup with profit margin.

A £10 profit on a £50 selling price represents a 20% gross margin, not 25%.

Hourly pricing

This can be useful for services where the time required varies.

For example, a freelancer might charge based on estimated working hours.

But your hourly rate needs to reflect more than just the hours spent delivering the service.

It should also help cover overheads, administration, unpaid time and the income you want the business to generate.

Fixed-price packages

Some businesses prefer to offer clearly defined packages.

A photographer might offer a portrait session with a set duration and number of edited images.

A social media manager might offer a monthly package covering a specific number of posts.

Packages can help customers understand what they're paying for and make pricing more predictable.

The best pricing method is one that customers can understand and your business can deliver sustainably.

5. Research Your Competitors Without Copying Them

It's natural to look at what similar businesses charge.

Competitor research can help you understand the market.

But copying someone else's price without understanding their costs can be dangerous.

Another business might:

• Buy materials at lower prices.
• Operate from a cheaper location.
• Have more experience.
• Produce larger volumes.
• Offer a different level of service.
• Have different financial goals.

Imagine two cake businesses charging £60 for a celebration cake.

One owner takes two hours to complete an order.

The other takes five hours.

Even with similar material costs, their economics are very different.

Use competitor pricing as context, not as the only reason for choosing your price.

6. Don't Automatically Compete by Being the Cheapest

When you're starting out, lowering your prices can feel like the easiest way to attract customers.

But being the cheapest isn't always a sustainable strategy.

If your prices are too low, you may struggle to cover costs, invest in better equipment or pay yourself adequately.

Instead, think about the value customers receive.

That could include:

• Personalised service.
• Quality materials.
• Specialist skills.
• Convenient delivery or collection.
• Attention to detail.
• Reliability and clear communication.

Customers may be willing to pay more when they understand what makes your offering different.

That doesn't mean every business should charge premium prices.

It means your pricing should reflect your costs, your customers and the value you provide — not simply the lowest price in the market.

7. Learn How to Calculate Your Break-Even Point

Your break-even point is the level of sales at which your revenue covers your costs, before making a profit.

Understanding it can help you set realistic sales targets.

Example: A small product business

Imagine:

• Monthly fixed business costs: £300
• Selling price per product: £25
• Variable cost per product: £10

Each sale contributes £15 towards fixed costs and profit.

Your break-even quantity is:

£300 ÷ £15 = 20 products

You would need to sell 20 products in the month to cover those assumed fixed and variable business costs.

Sales above that level would begin contributing to profit, assuming the figures remain unchanged.

This is a simplified example and doesn't include every possible cost, tax or personal income requirement.

But it shows why knowing your numbers matters.

Pricing becomes easier when you understand how many sales you actually need.

8. Be Clear About What's Included in Your Price

Customers appreciate knowing what they're paying for.

And clear pricing can protect you from misunderstandings.

If you're a photographer, explain how many photographs are included.

If you're a baker, explain whether delivery or decorations cost extra.

If you're a designer, explain how many revisions are included.

If you provide a service, clarify the scope before beginning work.

Questions to answer

• What exactly is included?
• Are there any additional charges?
• When is payment required?
• What happens if the customer requests changes?
• What are the cancellation or refund terms?

Make sure your pricing and terms comply with applicable UK consumer law, including requirements to communicate prices and unavoidable charges clearly.

Clear pricing helps customers make informed decisions and reduces confusion later.

9. Review Your Prices as Your Business Grows

The price that worked when you launched may not work forever.

Over time, your costs might increase.

You may invest in better equipment.

Your skills may improve.

Your products may become more complex.

Or you might discover that certain services take longer than expected.

Reviewing your prices doesn't mean increasing them every month.

It means checking whether your current pricing still makes financial sense.

When should you review your prices?

Consider reviewing them when:

• Material or supplier costs change significantly.
• Your operating expenses increase.
• You introduce new products or services.
• You consistently underestimate how long jobs take.
• Demand or capacity changes.
• Your profit margins are lower than expected.

Don't wait until you're exhausted and losing money before checking whether your prices are sustainable.

10. Make Sure Customers Understand Your Value

Pricing and marketing are closely connected.

If customers don't understand what makes your product or service special, they may compare you only on price.

That's why presenting your business professionally matters.

Clear photographs, useful descriptions, customer reviews and a well-organised website can help people understand what you offer.

For example, instead of only displaying a photograph of a cake with a price, explain its size, flavour options, customisation and ordering process.

Instead of simply listing a photography package, explain what's included and who it's designed for.

The easier you make it for customers to understand your offering, the easier it becomes for them to assess whether your price is right for them.

For more practical marketing advice, read our guide:

How to Promote Your Small Business Online on a Budget

A Simple Pricing Checklist for Small Business Owners

Before setting or changing a price, ask yourself:

• Have I calculated my direct costs?
• Have I allowed for overheads?
• Have I considered the value of my time?
• Do I understand my expected profit?
• Have I researched comparable businesses?
• Is the price realistic for my target customers?
• Have I explained what's included?
• Have I considered tax and any applicable VAT requirements?
• Can my business sustain this price?
• Do I know when I'll review it?

You don't need a complicated financial model to begin.

But you do need a reasonable understanding of your numbers.

Frequently Asked Questions

How do I price handmade products?

Start by calculating materials, packaging, labour and relevant overheads. Then consider your desired profit, comparable products, customer demand and any applicable taxes.

How much should a sole trader charge per hour?

There isn't one universal hourly rate. It depends on your skills, industry, costs, billable hours and target income. Your rate should account for unpaid administration and business expenses as well as the time spent delivering work.

Should small businesses charge less than larger companies?

Not necessarily. Smaller businesses often have different costs and may offer more personalised services. Pricing should reflect the actual economics and value of your business rather than company size alone.

What's the difference between markup and profit margin?

Markup measures profit relative to cost. Margin measures profit relative to selling price. For example, a product costing £40 and selling for £50 has a 25% markup and a 20% gross margin.

How often should I review my business prices?

Review them whenever your costs, demand or services change significantly. A regular review can also help you identify products or services that are no longer profitable.

Your Work Deserves a Sustainable Price

Running a one-person business takes more than talent.

It takes time, energy, organisation and financial responsibility.

You're not just creating products or delivering services.

You're managing a business.

And that means your prices need to support more than today's order.

They need to help you cover your costs, plan for the future and keep doing the work you're proud of.

You don't have to be the cheapest business to be the right business for your customers.

Start by understanding your numbers.

Be clear about what you offer.

And don't be afraid to review your prices as your business develops.

The Local Finds Tip

Before accepting your next order, calculate what it actually costs you to deliver it — including your time.

That one habit could help you make more informed pricing decisions.

At Local Finds, we're building a platform that helps independent UK businesses showcase their products, services and the stories behind their brands.

If you'd like another place to present your business online, explore our £20/month business listings.

This article provides general business information, not personalised accounting or tax advice.