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Home » How to Determine the Cost of Services You Offer in the Market

How to Determine the Cost of Services You Offer in the Market

By Richard Daniels Reading Time: 3 mins
Updated August 18, 2017

Cost of Services

Fixing the price of a product tends to take place in relation to its unit price, while fixing the cost of services is a bit more complicated and subjective: There are more factors to take into account as your time, your experience, your training and the perception that your target audience has about the value of your activity.

To make sure you give your services a fair and competitive price, but at the same time you leave the margin of profit enough to justify your dedication, there are some factors that you have to consider during each of the steps while determining the cost of services you offer.

4 – Factors to determine the Cost of Your Services

Below is the list of 4 factors, which should be in your mind while determining the cost of services you offer in your industry. This is your cost that fixed your value.

  1. Calculate your Costs

This step is very important, since it is the starting point to establish the price that you will charge your customers: what are the costs that you have to cover in order to offer your services?

Before you rate your activity you have to establish how much it costs you to carry it out. These expenses can be direct (materials, structure, travel expenses, taxes on your activity, etc.) or indirect (marketing, training courses, telephone expenses, expenses associated with maintaining a website, etc.)

However, the most important cost to consider is not money, but in time: how many hours does it take you to carry out the service? What is the value of your man-hour?

  1. Investigate the Market

The second step to determine the value of your service is to do a small market study: how much do your direct competitors charge for the same service? How are your services different from yours? Do they offer something that you do not offer, or vice versa? What is the public’s reaction to their prices?

This will give you a first look at price ranges within your industry. Keep in mind that there is a thin line on the concept of a ‘right price’: if you charge much more than your competitors without offering additional benefits, you run the risk of losing your customers to cheaper options. If, on the other hand, you charge less than your competitors for a similar service, it is likely that your customers will question the quality of your work.

If you intend to charge above average, you must clearly identify the extra benefits you offer to customers, and attribute a value to each of those benefits. If on the contrary your intention is to charge below the market average (which can be useful during the early stages in which you are still building your brand), you have to have a good pretext for which the cost of your service is smaller, and not simply a “yes”.

  1. Ask your Customers

To get an idea of ​​the market value of the service you provide, your customers are the best source of information: ask them how much they are willing to pay and what minimum benefits they expect for their money. Other useful questions you can ask are: who provides the best service in your area? How much do clients value their qualifications and experience?

If you offer your services through online platforms like, take advantage of the evaluation system of such platforms and invite your customers to value your activity through them. This will ease the task as customers are more inclined to respond honestly and openly to an online assessment because of the sense of protection offered by having a screen in between.

If you do not work that way and you do not have an automatic evaluation system, you can prepare a simple form that your clients can fill out to express their satisfaction (or dissatisfaction) with your services.

  1. Determines a reasonable Profit Margin

Once you have compiled all the information mentioned in the three previous points, you have to assess your services in a way to ensure that you are receiving a benefit that is worth the effort and the dedication. This is a delicate exercise that requires a great sense of balance, since your prices will have a direct effect on the perception that your customers and competitors (and the market in general) will have over your services. Now I’m sure after determining these factors, now you will easily be able to determine the cost of services you offer in the market. Keep visiting the website to learn more about such business terms and strategies.

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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