How to Determine Your Prices

How to figure out what to charge so you can pay your bills and bring home a living salary

If I asked you the right way to set your prices, most of you would tell me to figure out what the “market rate” is and charge that, or somewhere near that. 

If you’re currently running your own practice, and you set your prices this way, are you charging enough to bring home what you need to make each month? Are you struggling to pay your business bills and bring home a salary?

The overwhelming majority of the massage therapists I’ve talked to over the years don’t charge enough to comfortably pay their business bills and bring home the amount of money they actually need to live. 

That’s because the “market rate” isn’t the final say in how much your expenses are. 

So let’s start at the beginning, and I’ll teach you how to actually determine for real how much you should be charging. 

The more time you take working through this part, the easier your life will be later. You could rush through this and make it up as you go, but doing it for real and taking the time to do a little bit of research and thinking will set you up to be in a position most of your peers have never been in. 

How to Determine Your Rate

Your rate is based primarily on two actual factors: your expenses and your salary. 

If you go into practice and suddenly have hundreds of dollars of monthly bills to pay, plus you need to bring home enough money to pay your personal bills, does it really make sense to see what some Tom, Dick, or Harry is charging down the street and then charge the same amount? Or worse, a little less so people will come to you instead? 

Rather, let’s use some basic math to figure out how much you actually need to bring in, and work backward from there. Once you do this the first time, and you actually spend a little time and effort doing it, you’ll find it’s not difficult and it is extremely helpful. 

Determine Your Expenses

Your expenses are the things that cost you money inside your business. Each business’s expenses are slightly different, and they vary month to month, and year to year. Additionally, a very young business has many fewer expenses than one that has been in operation for many years. 

Use the list below and select the expenses your business will have in the first few months of operation. Use the How to Determine Your Prices Worksheet and fill in the expenses that apply to you. 

If you already know the cost associated with that expense, note it on the worksheet. If you don’t, do some research. For example, maybe you haven’t yet signed a lease agreement for an office, but you need one. Get online and look at actual rental listings. Choose something that will suit your needs and that is very affordable. Use that number on the worksheet. (I’m not saying sign a rental agreement. I’m saying use that very real number as if that very real office space was your own.)

NOTE: You do NOT need very many of these things in order to start practicing. I know that because I started my professional practice with very little. Do NOT go into debt to buy things for your business. Use what you have now, make money, and put that money back into your business. Not sure how? Check out How to Start Your Private Practice.

Common Expenses

• Advertising
• Education
• Equipment
• Expansion
• Insurance
• Internet
• License
• Outside Services
• Phone
• Rent
• Software
• Supplies
• Uniforms
• Utilities

Common Expenses Explained

Advertising:

Includes cost of business cards, marketing flyers, networking membership dues, Chamber of Commerce fees, paid advertising space in magazines, newspapers, or other print materials, as well as paid advertising on radio, TV, and social media.

Education: 

Include here a fixed amount for known or required education. If your state requires continuing education to renew your license, determine how much your chosen education courses will cost and note that figure here. 

Equipment:

Equipment includes some of the things you will need to perform your services. Generally, these are renewable or reusable items. Supplies can include: tables, linens, bolsters, pillows, chairs, stools, clipboards, clocks, lotion bottles, file folders. Different than supplies.

Expansion:

This is a category designed to give the business owner margin to buy additional equipment, replace older items with newer items, move into larger office space, and generally expand his or her services. Expanding a business in anyway will require additional funds. If the business owner does not strategically save for those expenses, he or she will be unlikely to have any “extra money” laying around when the business operations begin to demand a change. 

In the first couple of years, therapists need to buy additional sheets, blankets, towels, and sometimes pillows and bolsters. The furniture decor items they used to just get started often can be replaced with more carefully chosen items that better fit the therapist’s style, and advertising efforts often need to expand to reach more and more possible customers. 

Inevitably, the business owner will find he or she needs to move, and a new security deposit and first month’s rent will be required before he or she has received back the last deposit. And at some point, the single practitioner may want to expand and hire. All of this requires money above and beyond the monthly financial requirements of running the business. A wise business owner will save in strategic amounts over time in order to have a useful pool of money to draw from when these needs and opportunities arise, rather than trying to scrimp and save at the time he or she needs the money. 

Generally, 5-10% a year is a reasonable figure. Once you determine your annual expenses, calculate 5%, then calculate 10%. Decide which amount (or somewhere between the two) is the most reasonable and comfortable for you and where you’d like to be next year. Then divide the number by 12 for the monthly average. This amount will go straight into a separate bank account each month to be held as savings for your business. 

Insurance:

Includes liability insurance. If your business has additional expenses of renter’s insurance, business insurance, disability insurance, or increases to your homeowner’s policy for those who are working from home, those expenses are noted here.

Internet:

This category only applies if your business will be required to pay this expenses. If internet is included in your rent, this line item is $0. If you operate out of your home, you’ll need to speak with your accountant about this to whether or not your business should pay part of the household internet bill. Your accountant will help you determine what percentage of the internet bill your business can/should pay. If you determine that your business will pay part of that expense, put that figure in this line item.

License:

Annual or biannual cost of renewing your license. If you practice in a state that renews biannually, record half of the expense in the “Annual” column of this worksheet.

Outside Services:

This category includes any services your business pays for such as an accountant or CPA, a bookkeeper, laundry service, social media, website, or PR services, etc. You may add as many “Outside Services” lines as you need to reflect the number of services you pay for.

Phone:

If you are using your personal phone for business, you’ll need to speak with you accountant to determine whether or not your business should pay part of the phone bill. Your accountant will help you determine what percentage of the phone bill your business can/should pay. If you determine that your business will pay part of that expense, put that figure in this line item. 

If you have a phone used exclusively for business, the entire sum of that expense should be noted here. 

Rent:

This includes rent or mortgage, and only applies if your business will incur an expense for using the space in which you will practice. If you are mobile and do not pay rent on an office space, you will not have an expense for this line item. If you are using part of your home as a home office, speak with your accountant about whether or not your business should pay part of the rent or mortgage. Your accountant will help you determine what percentage of the rent or mortgage your business can/should pay. If you determine that your business will pay part of that expense, put that figure in this line item. 

Software:

If you plan to use any kind of scheduling or SOAP noting software that you will have to pay for, record that figure here.

Supplies:

Supplies include most of the things you will need to perform your services. Generally, these are non-renewable or non-reusable items. Supplies can include: lubricant, hand soap, hand sanitizer, paper towels, cleaning solutions, paper, pens, batteries. Different than equipment.

Uniforms: 

If you wear specific clothing to work such as scrubs, logo shirts, etc., that expense is noted here.

Utilities:

Just like rent, this category only applies if your business will be required to pay these expenses. If utilities are included in your rent, this line item is $0. If you operate out of your home, you’ll need to speak with your accountant about this to whether or not your business should pay part of the household utilities. Your accountant will help you determine what percentage of the utilities your business can/should pay. If you determine that your business will pay part of that expense, put that figure in this line item.

Determine Your Salary

At the end of the day, you’re in business to make a living. Yes, we want to help people, and we love what we do, and we all view our craft as a way of “giving back,” and that’s all wonderful. But the hard reality is that you can’t keep doing it if you can’t pay your bills. A business that does’t pay its bills is one that is closed. 

And one of the most important bills your business must pay is your salary. You cannot work for free. This is an absolutely ludicrous idea. 

So how much money do you need to make to live? Hopefully you already have an idea of how much money it takes to run your household each month. If you don’t, complete the same exercise as above but do it with your personal household expenses. You need to know how much money it takes to live each month. If you’re married, you would do this with your spouse. 

Your living expenses should not total 100% of your income. If you plan to work your massage business full time, and this will be your only source of income, you need to factor this in. How much above your expenses do you need to meet your savings and retirement goals? 

Once you have figure out your personal expenses and you have your income need each month, you can set income goals. 

Perhaps one day you’d like to make $5,000 a month, $7,000 a month, $10,000 a month. Whatever it is, write it down and keep it handy. You can use it on the worksheet. 

Determine Your Hours

This is a critical piece of information you must determine in order to figure out your rates. How many hours will you work each week? Additionally, you need to know, is that your max number of hours? 

For example, when I was working to get my practice up and running, I had to take a part-time job in order to just get some money coming in the door. That limited the number of days I had available for massage appointments. During that season, I had a fixed limitation on the number of hours I could work each week. 

Obviously the goal was to get to the point I could quit the part-time job and do massage full time. When that happened, I had many more hours available each week. 

Maybe you’re a mom, and you only have one evening day and one weekend morning to offer for appointments right now. Maybe you’re in school, and you have three mornings a week that you can take appointments. Maybe you have a full-time job during the week, so you can only offer appointments on weekends for right now. 

There isn’t a right or wrong answer necessarily, you just need to know what these numbers are. 

Caveat: If you plan to work, say, 10 hours a week, but you expect or require $5,000 salary per month, this is not realistic—at least not when you’re just starting. If your base rate end up being $200/hour because you plan to work so few hours, that isn’t practical. So while the number of hours you can work is totally subjective to you, you will need to keep it realistic and manageable for the customer base you plan to serve. 

How many hours can you work per week right now?

How many hours per will will be your max? 

Using the Worksheet

Determine Your Expenses

“Expense” Category

List the expenses your business has now, or will have as soon as you start practicing. In the very beginning of your practice, you may have very few expenses, and that’s normal. Just list what you have now or will have when your business is open. 

“Monthly Cost” / “Annual Cost” 

The worksheet has two columns: monthly cost and annual cost. This is because some of your expenses are things you’ll only pay once a year, like your liability insurance, for example. You would record that in “Annual” column for now. Other things you’ll have to pay each month, like your internet bill. You’ll record that figure in the “Monthly” column. 

“Monthly Average”

On the far left, there is a “Monthly Average” column. Ultimately, each expense line will need a figure in this column in order to complete this exercise. The monthly average items can easily be copied straight into the “Monthly Average” column because that is the monthly amount. For the “Annual” expenses, divide the number by 12 and put that figure in the “Monthly Average” column.

“Total”

Total all the numbers in the “Monthly Average” column. 

Determine Your Salary

Monthly Salary Requirement

This is amount of money you need to bring home each month. This is not a random figure. This is a sum determined by your personal household budget. If you’re not sure what that is, refer back to this section in the article above. 

Paycheck Calculator

If you know how much money you need to bring home every two weeks, you can figure the monthly need by doing the following calculation:

______________________ x 26 = ______________________ / 12 = ______________________

Paycheck total every two weeks  Monthly Salary Requirement

Determine Your Hours

Fill in each line with the number of hours you’re able to work each week. An “hour of work” in our industry is considered one 60-minute massage. This does not include time for set up, clean up, charting, or any other administrative tasks. 

Each of the three lines might be the same for you right now, or they might each be different. Fill in all three, and if they are different, you can use the different numbers to see how your base rate requirement changes. 

Put It All Together

Follow the color-coded sections of the worksheet and compete the basic math. The figure you end up with in the gray line is the amount of money you must charge per session hour to maintain a financially fit practice. 

Determine Rates In Your Area

We’ve already talked about how you can’t use “market rates” to set your own prices. It is a good idea, however, to know what others in your market are charging. 

Use this section of the worksheet and do some research into your area. Find at least three practices/businesses in each of the below categories. Look at their websites and marketing materials to determine what they charge for a 60-minute massage, a 90-minute massage, and if they offer any kind of introductory or new-client special. 

You now can use this information to see where your rates and offerings fit it. The intro rate is a good place to try to compete, if you’re going to adjust your rates at all. 

Additionally, if you determined that you must charge $74.66 per session, and the going rate in your area is $85-90 per session, and you found other solo practitioners like yourself with small, new practices charging closer to $85, you might consider setting your own rate at $80 this year. You know you can offer an introductory rate of $75 and still cover your financial needs. 

Corporate:

Corporate places are Massage Envy, Hand and Stone, Elements, Massage Heights, Spavia, etc. These are the chains that are found all over the country, in almost all towns and all states. 

Large Practice:  

Large practices are privately owned clinics that have multiple therapists working in them. Try to find practices that have five or more therapists in them. 

Single Practitioner:  

Single practitioners are folks just like you who are practicing as you are or want to be. If you’re a massage therapist, find other massage therapists in your area practicing on their own. If you plan to run a mobile practice, find other mobile therapists. If you practice a technique or modality that is very specific, try to find other therapists practicing that modality. It’s really helpful to find therapists who have about the same amount of experience as you have.

Conclusion

Healthy, long-lived practices are those that are run intentionally, strategically, and professionally. This all begins with having your services priced appropriately. 

If what you charge doesn’t cover your business bills and pay your salary, you don’t have a business, you have a mess. And you will forever struggle, because your patients will sense your disorganization, your money stresses, and your desperation to make a sale. 

Managing the money side of your business well, especially if you do so from the beginning, will dramatically increase your chances of having a successful practice for a long time. According to the Small Business Administration, most small businesses don’t make it past the first two years, and the biggest reason is because of money problems. 

Determining what you actually need to charge sets you apart from a lot of small businesses, and the majority of your massage peers. That is how smart and savvy massage therapists run successful private practices. 

_____________________

Catherine Nelson, LMT, CST, CKTS, is a long-time massage therapist with a long and varied background in Western medicine. She is the founder of Del Sol Community Wellness, The Master Institute School of Massage Therapy, and MyMassageTeacher.com. She specializes in CranioSacral Therapy for PTSD and anxiety, medical massage therapy for injury rehabilitation, and sports massage therapy for all phases of training and competition. She can be reached directly at Catherine@DelSolCommunityWellness.com. 

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