Setting your chargeout rate as a professional services provider

Young Professionals Working In Agency

If you operate as a self-employed lawyer, IT specialist, architect, manage a firm or agency, or provide professional services in any capacity, your time is your most valuable asset. As such, it’s crucial to ensure that you’re charging appropriately for your services, not only to maximise your income but also to maintain fair wages for your staff and strike a healthy work-life balance for yourself.

In this post we look at the importance of setting the right chargeout rates and provide guidance on how to calculate rates effectively.

The impact of undercharging

Undercharging may seem like a customer-friendly approach, but it can have significant repercussions on your business. It not only affects your ability to pay fair wages to your staff but also limits your personal time and family life.

Regularly reviewing and adjusting your chargeout rates is essential to keep your business thriving.

Read more about undercharging

Calculating chargeout rates

Setting the right chargeout rate requires a strategic approach. One common method is to determine the market rate, where you charge as much as the customer is willing to pay. Since different purchasers have varying levels of willingness to pay, it’s challenging to pinpoint an exact figure. Here are some steps to help you calculate an appropriate chargeout rate:

  1. Industry research: stay informed about industry standards by developing good relationships with other professionals in your field. While price fixing is illegal, understanding the general pricing trends in your industry can guide your rate-setting decisions.
  2. Industry surveys: some industries have bodies or external advisers that conduct surveys to gather information on market trends. Participating in these surveys can provide valuable insights into prevailing chargeout rates and help you position your services competitively.
  3. Networking: regularly engage with professionals in your industry to exchange information and insights. Being part of a larger industry reduces the risk associated with sharing pricing information, making it easier to stay updated on current trends.
  4. Consult your accountant: talk to your accountant about industry norms and whether they have clients in your sector. While confidentiality is paramount, accountants often have a finger on the pulse of general pricing practices within industries and can offer valuable advice.

A cost-based approach

Another approach involves starting with a desired annual salary, equivalent to what you might earn if you were working for someone else. To this base salary, additional costs are factored in, such as holiday pay, sick leave, non-chargeable work hours, and overheads like rent, power, administration, and marketing expenses. A profit margin is then incorporated into the calculation. This ensures that the chargeout rate not only covers personal earnings but also covers compensation for your assumed risk and addresses the business’s growth needs.


Setting the right chargeout rates is a balancing act that requires a combination of industry knowledge, networking, and strategic thinking. Regularly review your rates, stay informed about industry trends, and consult with professionals in your network to ensure that you’re not leaving money on the table. By taking these steps, you can maximize your profits while maintaining a fair and sustainable business model.

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