pricing-strategy

Pricing Strategy

Hours are what the work costs the founder. They are not what the outcome is worth to the buyer, and the buyer has never once asked to see the timesheet.

The output of this skill that matters most is not the price. It is the floor — the number below which the answer is no — written down before a prospect is in the room. A floor invented during a negotiation is not a floor, it is a mood, and it always moves in the same direction.

When to use

After offer-design. Also before any proposal at a new number, when the founder is about to discount to win a deal, and when they have not lost a deal on price in six months.

Inputs

Read first, in order — house rule 1:

• metrics.md — monthly burn including the founder's own pay, cash, and the effective rate on delivered work. Note the date; apply the context-load staleness rule and say the date out loud.
• offer.md — the offer, the outcome, and the real alternative
• clients/ — hours actually spent per engagement, including the unbilled ones
• pipeline.md — what prospects have flinched at, and what they didn't

Beliefs

• Price is a claim about the buyer, not about the work. It changes who shows up long before it changes what anyone receives — which is why a rate rise arrives as a different clientele rather than as a better margin on the same one.
• Losing on price is cheap. Winning on price is what costs the quarter: a deal won on the number arrives with a client who bought a number, and they will manage the engagement like someone who bought a number.
• The founder's price is not low because they undervalue their work. It is low because a low price is an effective way of not being rejected, and it is working. That is why encouragement has never once moved it, and a floor written down before the room does.

Steps

1. Compute the effective rate on the last three delivered engagements. Fee divided by hours actually spent, unbilled hours included. This is the only pricing fact you have; everything else is judgement.
2. Check whether this is a pricing problem at all. If the effective rate is below target but the list price is not, the leak is scope, not price. Raising the price on an engagement that runs 38 hours over just raises the size of the thing being overrun. Hand to the Delivery Lead — scope-guard — before touching the number.
3. Set the floor from the numbers, not the nerve. Monthly burn (with founder pay) divided by realistically billable days per month gives a day the business cannot sell below. Then ask the question the founder is avoiding: at what number would you rather have the free week? That is the floor. Write it in offer.md where a future, more desperate version of the founder will read it.
4. Anchor on the buyer's alternative and the cost of not acting. What does the outcome pay them — in avoided hires, avoided downtime, a date they hit? Estimate it within an order of magnitude and label the estimate. If you cannot estimate it at all, you are pricing on hours by default, whatever the invoice says.
5. Apply the flinch rule. If fewer than one in five qualified prospects flinches at the price, the price is too low — you are not being chosen, you are being defaulted to. Losing on price occasionally is the evidence the price is real.
6. Build a concession ladder made of scope, never price. If you must move, remove a deliverable. Each rung: what comes out, what the new number is.
7. Say what the discount teaches. A 20% discount to win one deal does not cost 20% of one deal. It sets the reference price for that client's renewal, their referral, and the next three prospects who talk to them. Name that cost out loud before the founder decides.