Pricing · Lesson 1
Know your full cost and margin
You cannot price well until you know what a project really costs you.
Many professional firms price from habit or competitor quotes, then wonder why they are busy but not profitable. Start with full cost. Direct costs are the hours and expenses spent on the project. Overheads are rent, software, admin staff, insurance and your own unbilled time. Every project must carry a share of overheads.
Calculate a true hourly cost for each grade of staff: salary plus benefits plus a share of overheads, divided by the realistic billable hours they work in a year (often 1,200–1,400, not 2,000). This figure is your floor. Pricing below it loses money.
Then decide your target margin — the profit left after all costs. Many service firms aim for 15–25% net. Track actual hours against your estimate after every project. The gap shows where your pricing or scope control needs work.
Example — Hypothetical: real hourly cost
A designer earns ₦7.2m a year. Benefits and overhead share add ₦4.8m. She bills about 1,300 hours. True cost: ₦12m ÷ 1,300 ≈ ₦9,200 per hour. Quoting her time at ₦8,000 per hour loses money on every hour.
Try this
Calculate the true hourly cost for yourself or one team member using salary, overhead share and realistic billable hours.
Reflect
On your last project, how far were actual hours from what you quoted? What caused the gap?