Pricing image by Inkling

Pricing image by Inkling

It's been a cold and snowy / mild and warm / damp and rainy winter. When our weather system is unable to make up it's mind, it might be asking a lot for business owners to effectively research and implement a proper pricing strategy.

Decision making related to pricing causes contention and confusion for many start-ups and growing businesses. It is such an important part of starting and running your business, but many business owners are unsure how to even start the process, much less how and when to increase pricing, how to be competitive, how to make sales, how to get and keep customers, etc.

So, while we're waiting to figure out what season will rear it's head tomorrow, it's a perfect time to learn about pricing and review the five most popular pricing questions/challenges!

Question/Challenge #1

Two very common comments that I hear from start-ups: "I'm a new business so my prices should be lower than my competitors" OR "I need to build my portfolio so will offer some services for free, just to get started".

What customers/clients think?

When a customer sees a product or service priced lower than the competition, they typically think one of two things:

  1. Sweet - I'm going to save some money.
  2. Why is this price so much lower? Is something wrong with it?

In the first scenario, this customer is excited to take advantage of your lower pricing. They may not have formed a judgement towards your product/service or business. They may simply think they are getting a good deal!

In the second scenario, the customer is questioning the price and why it is so different from other similar products/services. This can lead to a customer second-guessing the quality or lifespan of your product/service, second-guessing the intentions of the company, and/or second-guessing the value of the purchase.

This customer may walk-away from purchasing altogether or decide to choose another product/service that is known to be reliable (they've used it before).

In this scenario, your lower price did not encourage the customer to "try your product" or to "take a chance". It scared the customer.

When you under-value or under-price your products/services, customers may associate your lower prices with a low-value purchase. This is not the way to attract customers, especially new ones.

Value vs. Price graphic

Value vs. Price graphic

Pricing Lesson:

Don't undervalue yourself or your business. Even though you are new to business, it does not mean that you need to reduce your pricing to enter the market. 
Starting a business with pricing below the competition can lead to potential customers questioning the value of your product/service or the value that you, as the owner, bring to the business.

In addition, do not feel obligated to offer discounts or freebies to family and friends. Once it is offered, it is hard to explain to them why you are charging more next time.

Start-up Tips:

  1. Ensure your pricing is within the range of your competitor's pricing.
  2. You can say 'NO' to family and friends who ask for a "favour" or reduced pricing. You started a business to make money and be sustainable. Your friends and family should respect that.


Question/Challenge #2

"I'm new to the market, so I should offer and promote sales regularly to attract new customers. Right?"


What customers/clients think?

Customers are always attracted to sales - mainly for items or services they are actually interested in purchasing.

Sale graphic

Sale graphic

BUT, a customer can become comfortable with your sale price vs. your 'normal' price. This can cause issues/challenges in the future when you quote them on a product/service that is not on sale. A customer may push-back or decline to purchase from you, if they are expecting to pay the same price as last time (sale price).

This causes a lot of new entrepreneurs to feel obligated to offer the sale price again, and again, and again. They feel threatened, and fear the loss of a sale is the worst thing that can happen to their business. Reality check - one of the worst things that can happen is you keep putting in all the time and effort to start a business but don't actually make any money. Even worse, you keep losing money because you feel the "need" to keep making sales, at any cost (no pun intended).

Pricing Lesson:

Don't feel obligated offer a lot of promotions and sales. Don't feel obligated to offer one promotion, discount or sale. There is strategy behind running promotions and formulas to consider when offering sales. Ensure you do the math - your goal is to make money, not lose it.

Start-up Tips:

  1. Do not launch or start your business with a sale.
  2. If you want to run a promotion or sale, do so based on trends or demands in your industry. Consider offering a sale when you have created a big enough following to make money, even with reduced prices.
  3. When offering a sale or promotion, ensure your receipt/invoice shows the actual price and discount taken - not just the sale price. Ensure you show your client(s) what the actual, retail price of a product/service is so they are aware of what to expect next time they make a purchase.


Question/Challenge #3

Many new businesses do not start with the right pricing model in place and feel the need to increase pricing within 3-6 months of start-up. This usually happens because business owners start to understand how much time and effort goes into offering and selling each of their products/services. They typically have under-valued their labour and resources that go into one sale and start to learn the concept of real value.

What customers/clients think?

Customers may think that you are disorganized or some may think that you are taking advantage of them.

This can cause a lot of repeat customers to walk away, especially if an explanation or notice was not provided prior to the quote/sale.

Pricing Lesson:

Don't change your prices more than once per year.

Start-up Tips:

  1. Do your research so that the pricing you implement is appropriate for the year, anticipated trends and customer expectations.
  2. Tell customers that your prices are changing and the expected time/date they will change.


Question/Challenge #4

"How do I tell my customers that my prices are changing/increasing?"

What customers/clients think?

People, for the most part, understand that inflation is a reality of their everyday life. Logical human beings understand that prices go up in accordance to trends and demands in the economy.

On the other hand, people don't like change, especially negative change. If you withhold information or don't clearly communicate changes, your customers might be angry.

Be aware of your customer's needs and the human condition.

Pricing Lesson:

When you change your prices, notify your existing customers ahead of time; I recommend a minimum of 30 days. For example, send an email out to all active customers to explain the increase and when it will come into effect. Or, when a customer books their next appointment, update the individual about the changes then.
Don't tell existing customers that your prices changed the day their payment is due. This is disrespectful. Many business owners fear telling customers about price increases because there is a chance that they will not return. This is always a risk. Reduce the risk by respecting your customers and demonstrating exceptional customer service.

Start-up Tips:

  1. Don't change your prices more than once per year. 
  2. Be respectful. Be honest. Communicate clearly and effectively. The result will be return customers.


Question/Challenge #5

"I made a huge mistake when I started by business. My prices were way too low and now to compensate and be competitive, I need to double or triple my prices."

For example, a hair stylist charged $40 to cut, colour and style a woman's hair and the hair length was down to her lower back. After the services are complete, the stylist may review her sales to see that for a 2-hour session, she made $20 per hour, minus the cost of the dye and other resources used for this one customer. Granted, most stylists will have other customers in between colour jobs, but that is not guaranteed for a new business (not right away anyways).

So, the stylist decides to increase her prices. Great! The next time that customer comes into the salon, she sees that the cost to do her hair is $80 - compared to the $40 she paid before.

This may be too drastic of a price increase. The customer may not be prepared to pay for this significant increase in cost or might not have been notified about the price increase and may choose to walk away. As mentioned above, customers expect prices to increase but they may feel blind-sighted or taken advantage of if they see the price change significantly.

I understand that you need to increase your prices to compensate for the loss money and appropriately charge for your product/service. Unfortunately, the process may take time to recuperate. It is unfair to start doubling your prices and expecting your customers to pay the difference.

Remember: people don't like change, especially negative change. If you withhold information or don't clearly communicate changes, your customers might be angry and they have the right and ability to walk away if they are dissatisfied.

Pricing Lesson:

Do the appropriate research to identify the right pricing model for your business, industry and community BEFORE promoting or selling your products/services.

Start-up Tips:

  1. Be respectful of your clients. Don't do massive jumps in pricing.
  2. Be honest. Communicate clearly and effectively. The result will be return customers.
Zig Ziglar Quote - Repetition is the mother of learning, the father of action, which makes it the architect of accomplishment.



Pricing is essential to the sustainability of your business. If determined appropriately, your business will be competitive within an existing market, customers will see value in your products/services, your business will attract new and repeat customers, as well as your business and you will make money.

Here are a few additional tips and benchmarks to consider to help your business grow and be sustainable:

  • Review and update your sales and expenses every month. You are more likely to spend or lose money if you are not properly identifying the money coming in and going out of your business.
  • Are you making more than minimum wage? The current minimum wage as of January 1, 2018 (in Ontario, Canada) is $14.00 per hour. If you aren't, schedule an appointment with a business consultant, bookkeeper or accountant.
  • Identify when your business will 'break-even' or start making a profit.
  • Identify when your business will make a profit. What will you do with this profit? Will you purchase assets/reinvest it in the business? Save the money in a bank account?
  • Identify when you (the owner) can start drawing a salary/wages from your business.

I hope this article was helpful!

If you have any questions, don't hesitate to reach out at jodi@wordstock.ca