The Math on Your Own Idea, on Paper
Module: What to Actually Charge
Okay. Last two lessons we talked about charging for your time and adding up your real costs. This is the one where you actually do it. Grab a pencil. Not your phone, not a fancy app, an actual piece of paper. I want you to see the numbers in your own handwriting so you can't argue with yourself later.
Here's why I care so much about this exercise. My very first catering job, I charged a neighbor $200 to do the food for her daughter's wedding luncheon. Didn't do any math first. I just picked a number that felt friendly, because she was a neighbor and I liked her and $200 sounded like a nice, round, generous-but-not-crazy amount.
That job cost me $340 in groceries. Plus eleven hours of my time, which I hadn't counted at all because in my head the "cost" was just what I bought at the store. I didn't tell her. I just ate it, smiled at the reception, went home, and sat at the kitchen table trying to figure out what had just happened to my bank account. That was the night I opened my first spreadsheet. Wish I'd opened it before the job instead of after.
So let's not do that to you.
The four numbers you need
Take your piece of paper and write these four things down, in order.
1. Your real cost per unit. Whatever your "unit" is — one cake, one haircut, one hour of tutoring, one soap batch. Add up every ingredient, every material, every bit of packaging. Use actual receipts if you have them, not a guess. If you don't have receipts yet, go price it out at the store this week. Don't round down. Round up if anything, because prices at Costco and Macey's move around more than you think, and up here with our elevation and dry air some recipes take more of an ingredient to turn out right, not less.
2. Your time, in hours, at a real hourly rate. Not minimum wage. Not "whatever's left over." Pick a number that reflects what your hour is actually worth to you — what you'd want to be paid if a stranger asked you to do this for them. Write the number down even if it makes you flinch a little. It should, a little.
3. Your overhead, spread thin. This is the pan you bought, the mileage on your car, the propane for the smoker, the paper goods you keep forgetting to count. You won't get this exact and that's fine. Guess low-ish and adjust after a few jobs.
4. What you actually want to bring home. Not revenue. Profit. The number that lands in your pocket after everything above is paid for. Some people skip this line entirely, like it's greedy to write it down. It's not. It's the whole point.
Add lines 1 through 3, then add line 4 on top. That total is your price. Not a guess. Not a friendly round number. Math.
Do it for your actual idea, right now
Whatever you're testing — the baking, the tutoring, the lawn care, the soap — do this exercise for one single unit of it. One cake. One session. One yard. Don't do your whole business plan, just one transaction, start to finish.
Write it in four lines, add it up, and look at the number. Does it feel too high? Sit with that feeling for a second before you touch it. Most of us think our honest number is too high because we're comparing it to what we'd charge a friend, not what a stranger would pay a professional. That's a comparison problem, not a math problem.
Here's my opinion on this, plainly: if you're not charging for your time, you don't have a business. You have an expensive way to be nice. I know that sounds harsh. I lived it for two years before I said it out loud to myself. Being nice is a fine thing to be. Just don't let it wear a business's clothes and confuse you about why you're broke.
The check that saves you
Once you've got your number, do one more thing. Ask yourself: would I actually pay this, for this, from a stranger? Not from your neighbor who's tight on cash this month — we'll talk about that particular tangle another day. From a stranger. If the honest answer is no, go back and find where you shorted yourself. It's almost always line 2. Everybody shorts their own hour first.
A word of caution here, not a dramatic one, just a true one: don't build your whole pricing plan around one job's math. Costs move. Gas moves. The price of eggs moves, and lately it moves a lot. Redo this exercise every few months, especially when something in your supply chain changes on you.
Before next time
Bring your four-line math to class written down, even messy, even if the final number scares you a little. We're going to compare notes and I promise you're not the only one who guessed too low the first time. I certainly was.