After you’ve attracted customers and they’re ready to hire you, what do you charge them? How do you price your products and services? Here is a quick and simple formula.

1) Let’s say your ideal working life would mean you take off three months every year for vacation. Wouldn’t that be wonderful? 52 weeks a year minus 12 weeks vacation = 40 working weeks.

2) Now let’s say you want to work 30 billable hours per week. 40 working weeks X 30 working hours per week = 1,200 working hours per year.

3) Have you decided how much annual income you want to generate? I always keep talking about a six-figure income. Would that be all right with you? Let’s use $150,000 as an example. $150,000 income per year divided by 1,200 working hours per year = $125/hour. That’s what you charge.

“But, Monikah,” you might say, “I don’t bill by the hour, I sell products.” Well, let’s use a similar formula for products:

As an example, we’ll say you want to create your very own information product. This is a set of 4 CD’s and a printed manual that comes bundled together.

1) Four audio CD’s of recorded material.

Estimated development cost (editing, packaging, etc.):  $200 – $500

Estimated development time: 9-14 days

2) One 100 page manual, including diagrams, checklists, etc.

Estimated development cost : $300 using freelancers from www.elance.com

Estimated development time : 4 – 5 weeks

3) Put up a 3-page website to sell your product, including the back-office shopping cart to handle payments, email confirmations, autoresponders, etc.

Estimated development cost: $300 – $500 using Monikah’s favorite webdesigner company, Media Moguls.

Estimated set up cost: $0 using the 30-day free trial from Professional Cart Solutions.

Estimated development time: 3- 4 weeks.

Total upfront cost (conservatively): $1,300

Cost of first production run of 100 units: 100 X $30/unit = $3,000

Total production time = 5 – 6 weeks

From start to finish, to produce 100 units of your product, it will cost about $4,300. Let’s add a 50% profit margin and you must generate at least $6,450 in selling these 100 units, so you price them at $64.50 a piece.

While you’re in the five to six weeks of production (in other words, your product is not even finished yet), you conduct a pre-launch sale to your customers, letting them pre-order your product at $64.50 because when you launch in 30 – 45 days, the price will go up to, say, $97. You can create urgency by limiting the special price to the first 100 people (therefore covering your costs, and guaranteeing your 50% profit margin), or by a certain deadline date. It’s up to you.

Of course, you must keep in mind what the market will bear, so you do not price yourself out of your market by going too high (consumer questions its affordability) or too low (consumer questions its value).

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