My friend Alice has launched a home based business doing custom sewing and alterations.  She wanted to know how much to charge for her time and materials. I gave her this helpful link (A Guide for Home-based Sewing Professionals). Here are some issues we discussed:

The market.  After attending an alterations class, Alice was told by others in the business that she should charge about $20-$25 an hour, not  the $15 she had been charging. 

Her time is valuable.  If Alice needs to buy fabric or supplies, she was passing along the cost of the materials, but not charging for her time to do the shopping.  I encouraged her to add that time to her fee.  After all, she was taking the time to do the shopping for a client.

Experience pays.  As Alice gets more experience, she will work faster and provide better quality and is justified in charging a higher hourly rate.  As I have increased my experience as an accountant and tax preparer, I have increased my hourly rate over the years.  I'm still very reasonable, but charge more now than when I started 7 years ago.

Taxes!  Self employment tax is 15%, federal income tax can be 10-35% and state taxes are about 5% here in Ohio.  Alice figured she's need to mark up her price at least 25% just to cover her taxes.  In other words, if she wants  to clear $20 an hour, she needs to charge $25 just to cover her taxes.

Don't sell yourself short if you have a home based business.  Perhaps you can charge less than the market rate because you have low overhead expenses.  I charge less than many CPAs because I work from my home and avoid paying office rent.  But don't be afraid to charge a market-based competitive rate.  Your time and expertise is worth something.

Carol