Pricing

What it means

Pricing is the decision about what to charge. The honest way to do it is to ask what the result is worth to the buyer, and what it costs you to deliver it well. The dishonest way, which most of us fall into, is to ask what the buyer will tolerate and then shave a little off for safety.

When fear sets the price, it is usually too low. A low price does not only cut your margin. It also tells the buyer the result may not be worth much. Pricing from value means you understand what the buyer gains, such as saved time, fewer errors or more sales, and you charge a fair share of it.

Why it matters

Price is the fastest lever you have. A small change in price flows almost straight to profit, while a small change in volume needs more effort, more staff and more cost. If you price too low, you work harder for the same money and have nothing left to invest.

• You can afford better people, better service and better materials.
• You attract buyers who respect your work and pay on time.
• You stop competing only on who is cheapest.

How to use it

1. Work out your real cost to serve one customer, including your own time and the time of your team.
2. Ask five good customers what the result is worth to them in rupees, or work it out together.
3. Set your price as a fair share of that value, never below a healthy margin on your cost.
4. Test the new price on new enquiries first. Leave existing customers alone for now.
5. When someone says it is expensive, ask

Common mistakes

• Copying a competitor's price without knowing their costs.
• Dropping the price the moment a buyer pushes back.
• Pricing on your cost alone and ignoring the value created.
• Never raising prices because you fear losing old customers.

Try this today