How much to charge for your service: the pricing maths for service businesses
9 min read
Sanja is a hairdresser. She works six days a week, her diary is fully booked two weeks ahead, and at the end of the month there's €400 left in her account. She set her prices three years ago — she looked at what the salon across the road was charging and knocked a euro off. If that sounds familiar, this calculation is for you: one afternoon, a coffee, a calculator and three numbers that change everything.
Why "same as the competition, minus 10%" doesn't work
The most common pricing method in small service businesses goes: look at the price lists of two salons in the neighbourhood and position yourself just below them. The problem is that this isn't a calculation at all — it's copying someone else's homework without knowing whether it's right.
You don't know other people's costs. The salon across the road might work out of its own premises and pay no rent. Maybe the owner has another source of income, so the business doesn't have to cover her salary. And maybe — very often — she's running on the edge herself and has never worked out her own numbers. When you copy someone else's price, you copy their mistakes too.
The second problem: "minus 10%" attracts the wrong clients. Anyone who picks you because you're the cheapest option will leave the moment someone else drops their price by a euro. That's how the race to the bottom begins, where everyone works more and earns less.
The only approach that works: a price built from your own numbers, from the bottom up. Here's how.
Step 1: add up everything the business costs you each month
Take a piece of paper and list every cost you have, whether that month is busy or quiet. For our hairdresser Sanja, it looks like this:
- rent: €500
- utilities, internet, phone: €150
- contributions, tax and bookkeeping: €600
- equipment and wear and tear (scissors, hairdryer, chair — everything has to be replaced eventually): €100
- insurance, marketing and odds and ends: €50
Total costs: €1,400 a month.
Now the most important part, which most people skip: your salary. Your salary is not "whatever's left at the end". Your salary is a business cost, just like the rent. If Sanja wants €1,200 net for herself, her business has to cover this every month:
€1,400 in costs + €1,200 in salary = €2,600.
The figures for contributions and tax here are illustrative — they depend on your legal form of business and they change. This is not tax advice: check your exact amounts with your accountant.
Step 2: divide by billable hours, not working hours
Sanja works 8 hours a day, 21 working days — that's 168 hours a month. But nobody bills 168 hours. Part of the day goes on cleaning, ordering stock, answering messages, gaps between appointments and — most painfully — no-shows. Realistically, 65 to 75% of your time is billable.
For Sanja: 120 billable hours a month.
Now divide: €2,600 ÷ 120 hours = €21.70, rounded to €22 per hour of work. That's Sanja's floor. Every hour billed below that is an hour in which she's paying for the privilege of working.
Had she divided by all 168 hours, she'd have got €15.50 and been lying to herself.
That's why it brutally pays to protect your billable hours. Every no-show is a billable hour thrown in the bin — €22 that nobody gives back. Two things help most here: records (so you know who doesn't turn up and what it costs you) and reminders. In Appointa, no-shows are logged on the client file, and reminders go out automatically around 24 hours before the appointment: by e-mail and push notification, and — with the SMS add-on enabled — by SMS for clients without the app. No-shows typically drop noticeably after that.
Step 3: add materials and margin — only then do you have a price
The formula for an individual service:
Price = (hourly rate × service duration) + materials + margin (20–30%)
Example 1 — cut and blow-dry, 45 minutes:
- labour: 0.75 h × €22 = €16.50
- materials (shampoo, conditioner, products): €2
- total cost: €18.50
- 25% margin = €23.10 → price €23
Example 2 — colouring, 2 hours:
- labour: 2 h × €22 = €44
- materials (colour, developer, foils): €15
- total cost: €59
- 25% margin = €73.75 → price €75
Margin isn't greed. Margin is the reserve for the boiler that breaks down, for training courses, for January when the salon is half-empty, and for the day you decide you want to hire someone. Without a margin you don't have a business — you have self-subsistence.
And now the comparison that hurts: if Sanja currently charges €15 for a haircut, every client costs her €3.50. A fully booked diary at the wrong price isn't success — it's sinking faster.
Pricing psychology: how the number looks to the client
Once you've worked out your floor, there's still the question of how to present the price. A few things that work in practice:
Give the client three options. Instead of a single "haircut", offer cut / cut + blow-dry / cut + blow-dry + treatment. Most people choose the middle option, and the pricier version lifts the perceived value of all the others. The same goes for massage, training sessions and facials.
Round numbers for quality. €23 or €25 feels more confident than €22.99. Prices ending in ".99" signal a flyer promotion, not a professional you'd trust with your hair, your back or your face.
Publish your price list. A hidden price doesn't create curiosity — it creates suspicion, and people give up before they ask. If you take online bookings, let the price sit next to the service: on your Appointa public page (appointa.hr/s/your-salon) the client sees the service, its duration and its price before they book, so they arrive at the appointment with no unpleasant surprises.
No apologies. "Unfortunately we've had to put our prices up…" — don't. A price is information, not an apology. Anyone who apologises for their price is telling people they don't believe the service is worth that much themselves.
Sell the value before the number. Next to each service, write what it includes: the consultation, the products you use, how long it takes. The client then compares service with service, not number with number.
When and how to raise prices
A price isn't a tattoo. Here are four signals that it's time:
- Your occupancy has been above 85–90% for two or three months in a row.
- The waitlist keeps filling up — demand is greater than your hours.
- Your costs have risen (rent, materials, utilities) while the price list has stood still.
- Your prices have been unchanged for two years or more.
The first two signals are easy to miss when you're racing from appointment to appointment. In Appointa's statistics you see your occupancy and most-requested services on one screen, and a permanently full waitlist there isn't a problem — it's a signal that you're charging too little.
And now the maths that kills the fear. Say you do 100 appointments a month at €20: that's €2,000. You raise the price to €22 and lose 5 clients: 95 × €22 = €2,090. More money, less work. In practice, the drop-off after a moderate price rise turns out smaller than fear paints it — a good share of clients won't even mention the change.
How to do it cleanly:
- Announce it 3–4 weeks in advance — on the price list, in the salon, in a message to your regulars.
- Raise by 5–10%, not 30% in one go. Small and regular is easier to accept than rare and drastic.
- One sentence of explanation is enough. "From 1 December, prices are going up due to rising costs." Full stop.
- Reward loyalty with a reward, not with the old price. Instead of keeping the old price list for regulars forever (and ending up two years later with a chaos of exceptions), give them a loyalty programme or the occasional promo code. The price stays the same for everyone, and your most loyal clients get something extra.
Three numbers and one afternoon
It all comes down to three numbers you should know by heart: what the business costs you each month (€2,600 in Sanja's case), how many billable hours you have (120) and what your hour of work costs (€22). The rest is arithmetic: duration times hourly rate, plus materials, plus a 20–30% margin. The calculation takes one afternoon — and it decides whether, a year from now, you'll have a business that feeds you or a hobby that wears you out.
A note: the contribution and tax amounts in the example are illustrative. This is not tax or legal advice — check your own numbers with your accountant.
Once you've worked out the right price, let bookings, reminders and statistics do the work for you — alongside the calendar, Appointa tracks your no-shows, waitlist and occupancy. Try the demo for your industry — free, no card required. And the Starter plan is free — up to 30 appointments a month.
Frequently asked questions
What if my calculation shows a price far above the competition?
It means the competition has lower costs — or is running at a loss without knowing it. First check whether you can trim your costs or increase your billable hours (fewer gaps, fewer no-shows). If you can't, the price stands as yours. Clients don't choose on price alone: they choose trust, a well-run appointment and the result. Better 80 clients at the right price than 120 pushing you into the red.
Should I keep the old price for my regulars?
Not permanently — within two years half your price list will be "at the old rate" and you'll no longer know who pays what. Reward loyalty instead: a loyalty programme (say, a perk after every tenth appointment) or the occasional promo code just for regulars. One price list, rewards for the loyal.
How often should I recalculate my prices?
At least once a year — ideally at the end of the year, when you're putting together the plan for the next one. And out of cycle whenever the rent jumps, materials go up by more than 10%, or you introduce a new service. The first calculation takes an afternoon; every one after that takes half an hour, because you already have the costs spreadsheet.