Let me guess. When you set your prices, you looked at what your competitors charge. Or you picked a number that felt about right. Maybe you went slightly lower to be competitive. Sound familiar? You're not alone. It's probably the most common pricing strategy in the world. And it's also why so many service business owners are working themselves into the ground and still wondering where all the money goes. Here's the problem. The market doesn't care about your mortgage. It doesn't care if you want to take three holidays a year or if your car needs replacing. If you price based on what competitors charge, you might get clients. But you might also build a business that quietly keeps you broke. The Right Way Round Most business owners start with the market and hope the maths works out. The right approach is the opposite. You start with the life you actually want to live, work out what that costs, and then reverse engineer the business strategy to pay for it. This is what I call the Freedom Number. It's not a dream board exercise. It's proper maths. Step 1: What Does Your Ideal Life Actually Cost? Not your survival life. Your actual life. The one with the holidays, the car you want, the gym membership, the meals out. Everything you actually spend or want to spend. Add it all up. That monthly total is your starting point. In a recent Freedom Number Session I ran, one attendee worked out she needed £3,441 a month to fund her ideal life. Step 2: What Does Your Business Actually Need To Generate? Here's where most people make a fatal mistake. They think: I need £3,441 a month, so my business needs to make about £41,000 a year. Job done. Wrong. Because you've forgotten about tax. You can't just earn what you need to spend. You have to earn enough to pay the government their share first. To take home £3,441 a month, your business actually needs to generate £52,990 a year in salary for you. That's a gap of £12,000 before you've even counted your business overheads. Step 3: How Many Clients Is That? Once you know your required turnover (salary plus tax plus business overheads), you divide it by your average client value. That tells you exactly how many clients you need. And here's the bit that changes everything. If that number feels too high, if you look at it and think 'I don't want to serve that many clients,' that's not a volume problem. That's a pricing problem. Your prices are too low for the life you want to live. The Maths Doesn't Lie Most business owners are running on guesswork and hoping it works out. Knowing your Freedom Number turns a vague anxiety about money into a specific problem you can actually solve. And entrepreneurs are very good at solving specific problems. Want to work out yours? The Six Numbers Scorecard app will calculate it for you in about 10 minutes: https://six-score-track.base44.app Find out more about Momentum Academy
Ask most business owners how many hours they work and they'll say something like eight, nine, ten hours a day. Ask them how many of those hours actually generate money and the answer is very different. This is what I call the productive hours myth. And it's one of the main reasons service business owners end up with prices that don't work. What Are You Actually Doing For 8 Hours? When you're an employee, someone else handles the infrastructure. IT support, HR, admin, facilities. When you own the business, you ARE the infrastructure. Think about where your time actually goes each day. Answering emails. Doing your bookkeeping. Posting on social media to find the next client. Chasing invoices. Attending networking events. Writing proposals that don't convert. Fixing problems that shouldn't exist. None of that generates revenue. None of it is billable. And it takes up roughly half your working day. The 4 Hour Reality As a self-employed person or micro-business owner, you are lucky to get four genuinely productive, client-facing hours in a day. That's not laziness. That's the reality of running a business where you're doing everything yourself. If you have employees delivering client work, they'll manage more, perhaps five to seven hours. But for most solo operators, four hours is honest. What This Does To Your Pricing Here's why it matters. Let's say you've worked out you need to earn £52,990 a year. You want to work four days a week, take five weeks holiday. That gives you 176 working days. £52,990 divided by 176 days divided by 4 productive hours = £75.27 per hour. That's what you need to charge per billable hour just to take home what you need. Not to make a profit. Not to invest in your business. Just to pay yourself. Most people doing this calculation for the first time find their real hourly rate is double or triple what they currently charge. And their first instinct is to panic. 'My clients won't pay that.' It's Not A Pricing Problem. It's A Business Model Problem. If your maths says £75 an hour and the market says £30, you cannot work harder to close that gap. You will burn out trying to squeeze 12 hours of billable work into a day that only has four. Something has to change. Either your prices go up, your costs come down, your hours go up (not recommended), or you change who you're selling to. Knowing your real hourly rate doesn't create the problem. It just shows you a problem that was already there. And that's actually a gift, because now you can fix it. Want to work out your real numbers? The Six Numbers Scorecard app will calculate them for you in about 10 minutes: https://six-score-track.base44.app Find out more about Momentum Academy