Your cost floor: the number underneath every price
Sample video: in the live course this plays the full walkthrough.
Most people who work for themselves price by feel. They think of a number, flinch slightly, adjust it towards whatever the client seems comfortable with, and say it. Sometimes that works. The trouble is that a number arrived at that way cannot be defended, cannot be repeated, and cannot be checked, so a bad one can run for years without anybody noticing.
The fix is not a clever formula. It is a single number, worked out once on paper, that sits underneath every quote you give: your cost floor. It is what one hour of your working time has to cover before the work is worth doing at all. It is not your price. It is the line your price has to clear, and knowing it is the difference between negotiating and guessing.
What you’ll need
Before you start, put these on the table
- Twelve months of business costs. An export from your accounting software or your business account is ideal. A folder of receipts and a highlighter is fine.
- Your calendar for the last three months. Real weeks, including the quiet ones. This is what stops the whole exercise turning into wishful thinking.
- A list of every recurring subscription. Software, storage, stock libraries, a domain, a booking tool. These are the ones people forget, because each one is small.
- Anything you renew yearly. Insurance, professional membership, an accountant, a certification, the machine you replace every few years.
- A quiet hour. Genuinely. This is one afternoon of work that you then use for the next several years.
The steps
- Work in years, not weeks. Costs arrive unevenly and quiet months lie to you. Take a full twelve months as your unit and everything below gets easier.
- Count the weeks you will actually work. Start at fifty-two, then take off holiday, public holidays, and an honest allowance for illness and the weeks that vanish for reasons you cannot predict. Most people land somewhere in the mid-forties. Write your number down.
- Count the sellable hours in a working week. Not hours at your desk. Hours a client could reasonably be charged for. Quoting, invoicing, chasing, admin, marketing, and your own learning are all real work and none of it is sellable. If you are guessing, log two ordinary weeks properly before you continue. Almost everyone who does this for the first time finds the real figure is far below the one they assumed.
- Total your standing costs for the year. Everything that exists whether or not a project comes in: subscriptions, insurance, accountant, workspace, the share of your phone and internet the business uses, equipment set aside for replacement, training, bank charges. Add them into one annual figure.
- Add the amount you have decided your own time must not go below. Include what you set aside for tax and for the non-working weeks you counted in step two. This course does not set that number and cannot: it depends on where you live, what you owe, and what you have decided. It is yours. Write it down and be honest about it, because a floor built on a number you privately do not believe will not hold.
- Divide. Take the yearly total from steps four and five and divide it by the sellable hours you have in a year, which is your weekly sellable hours multiplied by your working weeks. The result is your cost floor per hour. One number.
- Test it against a real job. Take a project you finished recently, count the hours it truly took including the meetings and the revisions, and multiply by your floor. Compare that to what you charged. This is usually the uncomfortable moment, and it is also the point of the whole exercise.
Keep pass-through costs out of the floor entirely. Print, a stock licence, a subcontractor, travel to a shoot: those belong to one specific project, and folding them into an hourly rate makes the floor drift every time a project happens to have different expenses. Add them separately, per job, which is exactly how the tool below handles them.
Almost every floor that comes out suspiciously low has the same cause: the sellable hours are invented. Someone assumes a forty hour week is forty sellable hours, divides by a number that is two or three times too big, and produces a floor that quietly cannot cover the business. If one figure in this exercise deserves an extra half hour of care, it is that one. Log it, do not estimate it.
Put your numbers in
Once you have a floor, the arithmetic from a floor to a package price is short, and it is worth seeing it done rather than being told the answer. Type your own numbers in below. The tool prints every step it took, so you can check the whole thing on paper and satisfy yourself that nothing is hidden in it.
Course tool
Package price builder
Four numbers you already know, and the price a package would have to carry for them to hold.
1,108
12 hours of work, at a floor of 60 an hour, keeping 35% of the price.
12 × 60 = 720. Divided by 0.65 that is 1,107.69, rounded up to 1,108.
Margin here is a share of the price, not an amount added on top. Keeping 35% means dividing the cost by 0.65, which is a bigger number than adding 35% to it. Mixing those two up is the quietest way to price a project under your own floor.
- Amounts are unit-free. Type them in whatever currency you work in, and the answer comes back in the same one.
- This is arithmetic on numbers you typed. It is not advice, and it knows nothing about your client, your market, or what the work is worth to them.
- It deliberately does not tell you what you will earn. That depends on how much work actually arrives and on costs no calculator can see.
- Pass-through costs sit outside the hourly floor on purpose, so the floor stays steady from project to project.
One thing to notice while you play with it: the share you keep is taken out of the price, not added on to the cost. Keeping thirty-five percent means dividing by 0.65, which lands meaningfully higher than adding thirty-five percent to the cost. That single confusion has priced a great many careful people under their own floor without them ever seeing it happen.
The mistakes that quietly sink a price
1. Building the floor on the hours you wish you had. This is the big one, and it is covered above because it deserves saying twice. A floor divided by imaginary hours is a floor that sits below your actual costs, and every quote you build on it inherits the error.
2. Hiding project costs inside the hourly number. The moment print, licences, or travel get averaged into your rate, your floor starts moving for reasons that have nothing to do with your time. Keep them separate and per job, and the floor stays steady enough to be useful.
3. Treating the floor as the price. The floor is the bottom of the range, not the answer. What the work is worth to the client, how urgent it is, what it takes off their plate, and what you are carrying in risk all sit above it, and the next lesson is entirely about that gap. Quoting your floor is simply agreeing to work for the cost of working.
Work your floor out for the last full twelve months, following the seven steps above, and write the result somewhere you will find it again with today’s date next to it. Then do step seven properly on your two most recent finished projects. Put the floor back in the diary for six months’ time, and move it sooner if a standing cost changes or your sellable hours do. A floor with a date on it is a tool. A floor you worked out once and half remember is a feeling.