How to Price Your Services
Guide • Canada • last updated October 2026
How to set prices that cover costs and profit: hourly vs fixed, markup vs margin, and common mistakes, with free calculators.
Pricing is where many freelancers and small businesses leave money on the table. This guide covers hourly versus fixed pricing, markup versus margin, and how to cover costs and profit. Use the markup and margin calculators.
Hourly vs fixed pricing
Hourly pricing is simple and fair for open-ended work, but it caps your income at your hours and penalizes efficiency. Fixed pricing rewards speed and gives clients certainty, but you carry the risk if the job runs long. Many businesses use both, by task.
Markup vs margin
Markup is the percentage you add to cost; margin is profit as a percentage of the selling price. A 50% markup is a 33% margin, not the same thing. Knowing the difference stops you from underpricing.
Covering costs and profit
Price to cover direct costs, your overhead, the taxes you will owe, and a real profit on top. If a number only covers costs, it is not a price, it is a loss waiting to happen.
Common pricing mistakes
- Confusing markup and margin and underpricing.
- Forgetting overhead and taxes in the rate.
- Competing on price instead of value.
A worked example
A product costs $100. A 40% markup sells it at $140, a $40 profit and a 28.6% margin. To hit a 40% margin you would price at about $167.
Knowing your true cost per hour
Before you can price, you need your real cost of doing business: overhead, software, equipment, insurance and the taxes you will owe, divided by the hours you can actually bill. Many people price off a rough hourly figure and quietly lose money because they forget the non-billable hours and the overhead. Start from the true number, then add profit.
Value-based pricing
For work where the outcome matters more than the hours, price to the value you create, not the time you spend. A brand refresh that wins a client thousands in new business is worth more than the hours behind it. Value pricing rewards expertise and efficiency, and it decouples your income from the clock.
Raising prices without losing clients
Review your rates at least once a year. Give notice, tie increases to added value, and apply them to new work first. Good clients expect rates to rise over time; the ones who leave over a fair increase were rarely profitable anyway.
Pricing self-check
- Does the price cover cost, overhead, tax and profit?
- Are you confusing markup with margin?
- Could this job be priced on value instead of hours?
- When did you last raise your rates?
Testing and adjusting your prices
Pricing is not set once. Treat it as something you test and adjust: raise rates on new clients first, watch how many accept, and use that signal. If almost everyone says yes without hesitation, you are priced too low. If you win roughly the work you want at prices that cover cost and profit, you are close. Review at least yearly and after any big change in your costs or demand.
Anchor on value where you can, and keep your floor, the price that covers cost, overhead and tax, firmly in mind so you never accept work that loses money.
Pricing checklist
- Know your true cost per billable hour.
- Separate markup from margin.
- Price to value where the outcome justifies it.
- Review and raise rates regularly.
Frequently asked questions
How do I figure out what to charge for my services?
Start from your true cost of doing business, overhead, software, taxes and the hours you can actually bill, then add profit. That gives a price floor. Where the outcome matters more than the hours, price to the value you create rather than time.
What is the difference between markup and margin?
Markup is the percentage you add to your cost, while margin is profit as a percentage of the selling price. A 50% markup is only a 33% margin, so confusing the two is a common way to underprice. The markup and margin calculators convert between them.
How often should I raise my prices?
Review your rates at least once a year and after any big change in costs or demand. Apply increases to new clients first, give notice, and tie them to added value. Clients expect fair increases over time.