A free tool
The Pricing Equation
Your year, your offerings, then the deal in front of you. For the experienced practitioner who knows what the work is worth, and still hears their own voice change when they say the number out loud.
Where your quote lands
Four dials, each scored 0 to 3. Goodwill is how much of the gap you are willing to spend: add the three good dials, take off three points for every point of dread, divide by 9.
your quote = defensible − (gap × goodwill)
- Why nine
- Three good dials at three points each. Nine is the most goodwill there is, so dividing by it turns your score into a share of the gap. Six out of nine spends two thirds of it.
- Why three
- One point of dread has to cancel a whole dial. At dread 3 the goodwill is gone whatever the other three say.
- Dread at 0
- Takes nothing off. It is a penalty on the score, not a multiplier on your quote.
- What you fill in
- Three steps, one page
- Cost
- Nothing
- Your figures go
- Nowhere
- Time to run it
- Ten minutes
The number was never the problem. The pause after it was.
Most independent practitioners can work out what a piece of work is worth. What undoes them is the two seconds after they say it, when the buyer does not answer immediately, and the silence gets filled with a smaller number.
That concession is usually not irrational. There is a real reason: you like this person, they know everyone in your market, there might be something bigger here later. The problem is that the reason never gets sized, never gets written down, and never expires. It just becomes your rate.
So this puts the concession before the conversation instead of during it. You decide what this client is worth to you while you are calm, the arithmetic caps how much of your own margin you are allowed to spend on them, and what comes out has a size, a sentence, and a date.
Run it
Three steps, in the order they depend on each other
Your year first, because every other number is measured against it. Then your offerings, because a price only means something once you know how many of them close the year. Then the deal in front of you. It opens with example figures so you can see it working. Overwrite them. Everything recalculates as you type.
Your year
Five figures you work out once a year. They produce one number: what every working day has to average before you have earned anything at all. Most people have never calculated it, and nothing else on this page means much without it.
How to work this out
Start from what you spent last year rather than what you meant to spend. Twelve months of bank statements, total the outgoings, add anything annual you paid separately. Round up rather than down. This is the number the business exists to produce, so guessing it low is how a year quietly fails.
What people forget
- Insurance: general liability, professional liability, and whatever your buyers' contracts specify
- Software, on annual not monthly pricing
- Accountant, and any legal review
- Travel you will not be able to bill
- Entity fees, registrations, a business bank account
- Equipment, and whatever you have to replace this year
- Anything you are currently paying for personally that belongs to the business
Why this is a guess, and why it still belongs here
Self-employment tax plus federal and any state tax is the number that surprises people who have just left a salary, because withholding used to do it invisibly. Thirty percent is a common working placeholder in the United States and it is not advice. Put a figure in so the arithmetic is honest, then replace it with your accountant's the first time you speak to them.
Walk it down from 220
A working year is about 220 days after weekends and public holidays. Then subtract, honestly:
- Holiday you will actually take
- Days lost to illness, yours or a family member's
- Selling, writing, invoicing, admin. In year one this is rarely under a third
- Anything a second business or property consumes
What is left is what you can sell. For most people leaving a salaried role it lands near half of 220, and seeing that number is usually the moment the pricing conversation changes.
- You must earn
- $238,571
- Days you can sell
- 110
- Every day must average
- $2,169
That day rate is the rate you must average across the whole year, not the rate you would like to charge. It is the floor under every price on this page.
Your offerings, and whether the year closes
This is where you price a set rather than a deal. List what you sell, what you charge, what each one costs you in delivery days, and how many you honestly expect to close. The arithmetic then answers the only question that matters about a price list: does this mix reach what you must earn, in the days you actually have?
- The mix produces
- $238,304
- Against what you must earn
- $267 short
- Delivery days it consumes
- 80 of 110
The money is the constraint, not the calendar.
This mix lands close to what you must earn and leaves days unsold. That means the answer is a higher price or a different offering, not more hours.
Two failures this catches that nobody catches on their own. A mix that only closes if every engagement lands at the top of its range, and a mix that closes on money but runs out of calendar. Both look fine on a price list.
The deal in front of you
This step prices one engagement. Step 02 is where you price the year. Nothing here changes your annual arithmetic, and nothing here should be run before Step 01 has a real number in it.
This engagement
How to find it without guessing
Ask on the first call, in their words: what can you approve without going out to bid. People answer it, because it is a fact about their job rather than a negotiation. It is a better anchor than any market rate, because it is the number that decides whether your engagement is a decision made in a meeting or a decision made in a quarter.
- Floor for this engagement
- $19,152
- Defensible ceiling
- $25,000
- The gap between them
- $5,848
The four dials
This is the part everyone does in their head, badly, at the moment of quoting. Do it here instead, before the conversation, where the arithmetic can hold you to it. The dials never raise your price. They decide how much of the gap you are willing to spend.
Relationship
2 of 3
What is this client's relationship worth to you, apart from the fee?
Someone you want in your working life for the next ten years.
Network
2 of 3
What is their network worth to you? Not how big it is. Whether they will actually open it.
Their circle is most of your market.
Partnership
1 of 3
What would building something with them be worth? Score the version you would actually sign, not the version you daydream about.
Maybe something, someday, on no evidence.
Dread
1 of 3
How much do you not want to do this? Answer honestly. Unpriced dread does not disappear. It comes out as a late deliverable in week six.
Fine. It is work.
Everything you type stays in this browser. None of it is sent anywhere, and none of it is stored on any server. The tool remembers your figures on this device so you can come back to them. Start over puts the example figures back and removes what it saved, and clearing your browser data clears it too.
The most generous you can ever be is exactly the gap you already proved you could afford.
The three relationship dials do not raise your fee. They set a budget for how much of your own margin you are allowed to spend on a particular client, and that budget is the distance between what you can defensibly charge and the floor underneath it. Turn all three to the top and the quote lands on the floor, not below it. That is not a limit imposed on your generosity. It is the only thing that makes generosity survivable.
How it works
Four moves, in the order that matters
1
Build the floor
What you must earn in a year, divided by the days you can honestly sell, multiplied by the days this engagement takes, plus what it costs you out of pocket. Below that number you are paying for the privilege of working.
2
Name the ceiling
The highest figure you could say out loud without flinching, and that your buyer can approve on their own signature. Approval authority, not the market, is usually the real ceiling. A smaller number buys a faster decision.
3
Score the four dials
Relationship, network and partnership set how much of the gap you may spend. Dread burns it back at three points per point, so work you will resent returns to the standard fee no matter who the client knows.
4
Say it, and date it
Out comes the number, the founding client investment inside it, and the sentence that puts an expiry on that investment. Plus how much room is left underneath, which is the thing to know before the silence rather than during it.
Deliberate omissions
Three things it will not score
Every one of these is a real consideration. None of them belongs in a number you have to defend out loud.
What they can afford
Their budget is their business. Guessing at it is how you end up quoting their finance department instead of your work, and you will guess low.
How much you need it this month
That is the reason the floor exists. It belongs in stage one where it can be counted, not in stage three where it can only be felt.
What the last person charged
You do not know their cost base, their delivery days or what they gave away to win it. A number with none of that attached is not a benchmark. It is a rumor.
Above the arithmetic
Three rules the equation does not touch
The tool sets a number. These decide what the number is set against, and no calculator settles them for you.
1
Price the first engagement against approval authority
Its job is to begin the relationship, not to be the revenue. Something your buyer can approve alone is a decision made in a meeting. Something that trips procurement is a decision made in a quarter. Ask on the first call whether you would be a new supplier, because that answer is worth more to your runway than the price is.
2
Price the second engagement against what the first one found
That is where the money is, and it is the only place you hold a defensible figure to anchor against, because you produced it. Anchor against it. Do not take a share of it: a contingent share needs an agreed baseline, audit rights and finance validation, and to a regulated buyer's legal team it reads as a contingency fee.
3
Never quote either one against days
Days set your floor. They are not what you sell. Pricing by effort punishes you for getting faster, which is the opposite of what you want as your method matures. You will still be asked for a rate, because procurement needs a labor basis for the master agreement. Derive it from your floor arithmetic so it is read rather than invented under pressure, and keep the engagement a fixed fee.
If the number is not the hard part
Pricing is one of nine decisions.
The Practice Charter is a structured review of the whole practice: what you sell, to whom, at what price, how you prove it before you have a case study, how the first conversation goes, and where your effort belongs. Questions first are fine: thomas@thomastornatore.com.
The Pricing Equation is a self-calculation worksheet for your own planning. It is strategy, operations and planning work, and it is not financial, tax, accounting, investment, legal or insurance advice. The tax percentage is a placeholder until your accountant corrects it, and no output of this tool creates an advisory relationship.