Every founder we sit down with says the same sentence in the first ten minutes. Some version of: I think my prices are about right. Six conversations later, almost none of them were.
The pattern is so consistent it has stopped surprising us. A founder builds a product or a service, looks at three or four competitors, picks a number in the middle of what they see, and gets on with the work. The number sticks for months, sometimes years, without anyone going back to test whether it covers what it should.
The problem with sideways pricing is that it inherits everyone else's mistakes. If three of your competitors are also pricing by looking sideways, none of you are pricing from the base up. The whole market drifts toward the same too-low number, and the founders who can hold on the longest win, usually the ones with the deepest pockets, not the best business.
Build pricing from the cost base up.
The first exercise we run with a new client is the cost-of-delivery audit. For a service, that means time, tooling, overhead, and the cost of acquiring the customer in the first place. For a product, it adds inputs, logistics, returns, and the slice of fixed cost each unit needs to carry. None of this is exotic, it's just the work most founders skip because the spreadsheet feels heavy.
Once the cost base is honest, we set a margin target tied to a growth goal. Not a vibe. A number. If you want to hire one person next year, the margin needs to fund that. If you want six months of cash runway, the margin needs to fund that too. Every price decision after that point is a math problem, not a judgement call.
“Pricing is the most leveraged number in your business. Move it five per cent and the bottom line moves more than it does from any other single decision.”
What twenty per cent actually looks like.
In the last twelve client engagements, we found pricing gaps between fourteen and forty-one per cent. The median was right around twenty. That's not a small adjustment, it's the difference between a business that can afford to hire and one that can't, between a quarter that breaks even and one that funds the next quarter.
What we never find: a founder who is over-charging. Not once. The market self-corrects in one direction only.
What to do this week.
- Take your most-sold product or service. Just one.
- Write down every cost that touches it, including the share of your time, your overhead, and your acquisition cost.
- Compare that total to the price. The number you're left with is your real margin, not the one you thought.
- If it's under twenty per cent, you have a pricing conversation to have. With yourself first.
If you want help running this with us, the Profit-Clarity Pricing Calculator on the resources page is the same worksheet we use with clients. Or book a free thirty-minute consultation and we'll walk through one product together.
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