Most founders spend months on product and days on pricing. That ratio is backwards. Pricing is the single decision that touches every other part of your business — your margins, your customers, your positioning, and your ability to survive long enough to get it right.
The founders who get pricing right early are not smarter. They are more willing to treat it as a strategic choice rather than a number they pull from a competitor's pricing page.
Why founders consistently underprice
Fear is the most common reason. Fear that customers will say no, fear of the comparison to a cheaper competitor, fear of seeming arrogant about the value of something that does not yet have a track record. Underpricing feels safe. It is not. It attracts the wrong customers, compresses your margin before you have scale, and anchors your market at a level that is hard to escape.
The second reason is laziness. It is faster to look at what a competitor charges and set a number nearby. This gives you a defensible answer in a pitch meeting but does nothing to reflect whether that competitor's pricing is right, or whether your product is solving the same problem for the same customer.
What pricing actually communicates
Price is positioning. A higher price tells the customer that this product is for serious people with serious problems. A lower price tells them it is a commodity or a tool for people who cannot yet afford better. Neither is inherently wrong — but you need to choose deliberately.
Customers use price as a proxy for quality before they have enough information to judge quality directly. A consultant who charges £500 a day and one who charges £5,000 a day may be equally skilled, but the price signals different things about the market they serve and the outcomes they expect to produce.
The one question that changes how you price
Stop asking what your product costs to build or what competitors charge. Start asking: what is the value of the outcome my customer achieves? If your software saves a business 10 hours a week and a business hour is worth £100, the value of your product is £1,000 a week — not the £29 a month you assumed because that is what SaaS tools cost.
This does not mean you charge the full value. It means you stop anchoring to cost and start anchoring to outcome. The gap between cost and value is where your margin lives.
When to raise prices and how to do it
The best time to raise prices is before you think you need to. If you have a waitlist, raise prices. If customers are not pushing back on price, raise prices. If your churn is low and your NPS is high, raise prices. Resistance to a price increase is usually weaker than founders expect.
The cleanest approach is to grandfather existing customers and raise for new ones. This protects relationships while resetting your market anchor. Communicate it simply and without apology — the product is worth more than it costs.
Pricing principles worth internalising
- Price for the customer you want, not the customer you have.
- Test higher prices before assuming they will not work.
- Grandfather loyally and raise boldly for new customers.
- Simple pricing tiers outperform complex ones almost every time.
- Never apologise for your price in a sales conversation.
Pricing is not set once. It evolves as your product matures, your customer profile sharpens, and your confidence in the value you deliver grows. The founders who stay curious about pricing and revisit it regularly tend to find margin where others find pressure.
Start with a number that makes you slightly uncomfortable. That discomfort is usually a sign you are close to the right answer.
Frequently asked questions
If fewer than 20-30% of qualified prospects push back on price, you are almost certainly underpricing. Healthy friction at the pricing stage is a sign that the price carries weight.
Only if you have deliberately chosen to compete on price. Most startups should not. Competing on price requires scale to win, and startups rarely have it. Compete on outcome and charge accordingly.
