Pricing Strategies
Pricing is one of those areas in business where most people know it matters, but very few feel completely confident in how they’re doing it.
A lot of the time, pricing ends up being based on what feels reasonable, what competitors are charging, or what you think a client will accept without pushing back. While that might work in the short term, it usually creates problems over time. Either you’re working too hard for what you’re earning, or you’re losing work because your pricing doesn’t make sense in the market.
What it tends to come back to most businesses don’t have a clear pricing strategy; they have a habit.
The Default is Hourly
For a lot of businesses, especially in the early stages, pricing starts with time. You work out your hourly rate, estimate how long something will take, and charge accordingly. It’s nice and simple, and it feels easy to justify. The issue is that when you get better at what you do, and as you become faster, the less you earn for the same outcome.
There’s a good discussion here around how hourly pricing can work against you, particularly when skill and efficiency improve. At the same time, the client wants the job done quickly, while the pricing model rewards it for taking longer, so it’s not really aligned.
Value-Based Pricing
An alternative is to price based on the outcome you’re delivering, rather than the time it takes to get there. This is what we call value-based pricing.
Instead of saying, “this will take me X hours,” you’re saying, “this is what this result is worth.” A simple example is someone with years of experience who can solve a problem quickly. They’re not being paid for the time it takes, they’re being paid for knowing what to do.
For a lot of clients, that’s actually what they care about. They don’t want more hours. They want a better result.
The Market Still Plays a Role
That said, pricing isn’t done in isolation. No matter how you structure it, the market still influences what’s realistic. You might believe your service is worth a certain amount, but if the market isn’t willing to pay it, you’ll struggle to sell it.
This is where some businesses run into trouble. They either price too high without enough perceived value or they price too low because they haven’t tested the market. Neither is ideal.
Not all Strategies are About Being Cheaper
There’s often a temptation to compete on price, especially in competitive industries, but being the cheapest only really works if you have the volume to support it. Otherwise, you put pressure on margins, capacity and overall sustainability. Most businesses are better off competing on quality, experience, convenience and reputation.
Sometimes charging more actually improves the client experience
It sounds counterintuitive, but higher pricing can often lead to better client relationships. I’ve had this conversation with a lot of business owners, and the pattern is usually the same. The clients who pay the least tend to be the hardest to deal with. They’re more demanding, quicker to question things, and often unclear on what they actually want.
It’s not always intentional, but when someone is price-sensitive, they’re also more likely to be outcome-sensitive. They want to feel like they’re getting their money’s worth, so they scrutinise more, ask more, and sometimes push boundaries a bit further.
On the other hand, when something is priced properly, there’s a clearer understanding of value. The client has made a more considered decision to engage. Expectations tend to be more defined, and the working relationship feels more balanced. In that case, they are buying an outcome and because of that, they are usually more focused on the result than the process.
There’s also a level of respect that comes with it. Not in an ego sense, but in how the engagement is treated. When something is priced too cheaply, it can be perceived as lower value, even if the work itself is good. When it’s priced appropriately, it signals that this is something worth taking seriously. That doesn’t mean higher prices automatically solve everything. You still need to deliver, communicate clearly, and set expectations properly.
So, How Do You Price?
A lot of pricing uncertainty comes from not having a clear understanding of the numbers behind the business. You need to know your costs, margins, capacity and required revenue because if that information isn’t clear, everything becomes guesswork. Then again, pricing isn’t just about covering your costs. It’s about building a business that is sustainable, profitable, and aligned with the value you provide.
That means understanding what you deliver, who you’re delivering to and what the outcome is actually worth. The benefit isn’t just profit; it’s how the entire business operates.
