Pricing: How to Set It and When to Raise It

Ask any small business owner: how did you settle on this price?

And the answer in most cases is one of three: "I computed the cost and added to it", or "that is the

market price", or "it felt right".

And none of the three is pricing. They are ways of avoiding the decision.

The rule this course rests on

Cost tells you where your floor is. It does not tell you your price.

Read it twice.

Cost is a fact about you, and price belongs to whoever buys. **Between them is a space settled by

your decision**, not by arithmetic.

And the cost of getting this wrong is larger than for any other number in your business: **cost is

lowered by negotiation, time and effort, and price is raised with one sentence. And the increase goes

entirely into your margin — which is lesson three of the "Reading Your Business Numbers" course, and I

will not repeat it here**.

Three ways people price — and what is wrong with each

1. Cost plus a percentage ← it guarantees you will not lose, and guarantees nothing else. **Its flaw

is that it ties your price to your efficiency: the better you get and the faster your work becomes, the

lower your price — so you are punished for mastery**.

2. Like the market ← and you do not know how they priced, perhaps they priced by feel, **or

their cost is not yours, or they are losing and do not know it. So you copy a decision that was never

taken.**

3. By feel ← and it is usually lower than it should be, **because feel leans toward the fear of

refusal**.

And all three share one thing: not one of them asks about the customer.

Four questions this course answers

1. What is my floor? ← the number I never go below (lesson two).

2. What is my customer actually buying? ← and not what I provide (lesson three).

3. How do I present the price? ← and do I publish it at all? (lesson four).

4. How do I raise it on whoever buys from me today? ← (lesson six).

And try them now: answer all four. **And if you hesitated on the first, start at lesson two and do not

move past it.**

Why I will cite no price — neither mine nor the market's

And I say it in lesson one rather than in a closing footnote:

You will find not one figure in this course: **not my price, not a "usual" profit rate, and not what

anyone else charges.**

And three reasons:

1. A published figure becomes a reference ← **whoever reads it compares against it without knowing what

scope, cost and market sit inside it, and prices by copying rather than by deciding — which is

precisely the second error above**.

2. Prices change ← and a figure written today is read two years later, **so it misleads rather than

teaches**.

3. I do not publish my own prices, and I will not ask of you what I do not do ← **and lesson four

explains when publishing is right and when it is not, and states my position and its reason without imposing

it on you**.

And every example here is by method rather than by amount. **You will put your own numbers into every

exercise.**

What this course is not

It is not computing margin and break-even — that is the "Reading Your Business Numbers" course, **and we

will use its results in lessons two and five**.

Nor is it about collection — when you get paid and how to chase a late payer is in "Getting Paid". **A

price is one thing, and collecting it is another.**

Nor is it about inventory cost — that is the "Inventory" book.

Nor is it about advertising — and it will not teach you how to bring in demand, **but what to do with

the demand you have**.

When this course does not concern you

Three cases, and I will say them before you continue:

1. Your price is set by someone else ← a contract, a platform imposing a ceiling, or an official tariff ←

your room is narrow, **and read lesson two alone to learn whether what you receive even covers your

floor**.

2. You sell a standard commodity whose price everyone knows ← **your room is in the cost rather than the

price, and your answer is in the "Inventory" book rather than here**.

3. Your problem is that you are not selling at all ← and this is the most honest. **Price is not the

problem when nobody comes — and pricing does not create demand, and I will repeat that in the

closing**.

And the third is the one people resist: **cutting the price does not manufacture a market that is not

there — it makes the market that is there less profitable**.

What you need to start

And you need no system:

• A list of what you sell — products or services
• Your variable cost for each one
• Your monthly fixed expenses
• And an estimate of the time each job consumes from you and your team

And the fourth is the one omitted, and it is what overturns lesson two's result.

Action steps

1. Write the rule: cost tells you your floor, it does not tell you your price.
2. Ask yourself how you settled on your current price — and write the answer honestly.
3. Answer the four questions, and record where you hesitated.
4. Do not copy a competitor's price before you know your own cost.
5. Go honestly through "when this does not concern you", starting with the third.
6. Gather the four: what you sell, your variable cost, your fixed costs, and the time.
7. Change no price this week — compute first.
8. Write down the product whose price you most doubt — we return to it in lesson two.