Are You Charging Enough?
Why Pricing Strategy Starts with Your Numbers
Most business owners wrestle with pricing at some point. Should I raise prices? Will I lose customers if I do? What’s the “right” number?
The truth is, pricing is one of the most powerful levers you have to influence profit—but it’s also one of the most emotionally charged. Owners often underprice their services out of fear, insecurity, or lack of data. They worry about being too expensive, so they compromise. They guess.
But pricing isn’t just a marketing decision. It’s a financial decision, and it should start with a clear understanding of your numbers.
When you build your pricing strategy on actual financial data—your cost structure, margins, capacity, and goals—you gain the clarity and confidence to price in a way that’s sustainable, profitable, and aligned with the value you deliver.
The Danger of Underpricing
Let’s start with the risk.
Underpricing is more common than overpricing, especially in small, owner-led businesses. And while it may seem like a safer choice—“better to get the client than scare them away”—the long-term consequences can be serious.
Underpricing leads to:
Thin margins that make growth difficult
Difficulty affording good talent
Burnout from overwork and under-compensation
Inability to invest in tools, systems, or improvements
A client base that may not value your work
It also distorts the numbers. You may see a decent gross revenue number and think things are going well—until you realize there’s not enough left over at the bottom line to pay yourself properly or fund the next phase of growth.
Pricing affects everything. That’s why it has to start with the numbers.
Understand Your Cost Structure First
Before you can set pricing, you need to understand your cost of delivery.
How much does it really cost to produce each unit of your product or deliver each service?
This includes:
Direct labor: who is doing the work, and how long does it take?
Materials or tools: any goods used or consumed in delivery
Software, licenses, or vendor fees tied to specific jobs
Any team members, contractors, or systems that scale with the work
These are the components of Cost of Goods Sold (COGS) or direct costs. Subtracting these from revenue gives you your gross margin—and that’s one of the most critical numbers to track.
As we teach in The Playbook, understanding your gross margin by service line gives you insight into which parts of your business create profit—and which ones consume it.
If your pricing isn’t covering direct costs plus your required margin, you’re setting yourself up to lose before the month even begins.
Know Your Overhead and Break-Even Point
Once you understand your direct costs, the next step is knowing your fixed operating costs—your overhead. This includes rent, admin salaries, software subscriptions, marketing, and other recurring expenses that don’t change much month to month.
From there, you can calculate your break-even point:
How much revenue do you need to cover all costs?
How many units, clients, or hours does that translate into?
This gives you clarity about what it takes to keep the business afloat—and what’s required to move into profitability. Pricing decisions should account for this: if you discount too often or charge too little, you’re simply shifting the burden to yourself or your team.
Good pricing isn’t about guessing what the market will tolerate. It’s about building a model that sustains your business and honors your value.
Price Based on Value—But Anchored in Data
Many pricing experts talk about “value-based pricing”—charging based on the value you provide to the client. We agree with that concept. But without understanding your own costs and margins, value-based pricing becomes just another guess.
Instead, we encourage a layered approach:
Start with your cost and margin targets
Benchmark competitors to understand the market
Evaluate your positioning and brand promise
Test pricing with new clients or offers and watch the results
Your financials give you the floor. The market gives you the range. Your brand and delivery help determine the ceiling.
But the first step is knowing your numbers well enough to ensure you're never pricing below what the business needs.
What We Look At When Evaluating Pricing
At Precision Financial, here are some of the key numbers we analyze when helping clients evaluate or adjust their pricing:
Gross margin by product or service line
Utilization rates: how much of your team’s capacity is used for paid work
Client-level profitability: are certain clients disproportionately unprofitable?
Trends in cost of delivery: rising wages, tool costs, or scope creep
Break-even revenue targets and contribution margins
We often build side-by-side models showing what happens if pricing increases by 5%, 10%, or 15%—so the owner can visualize the impact on margin and cash.
These conversations aren’t just about numbers. They’re about building a business that’s healthy, sustainable, and fair to everyone involved—clients, team members, and the owner.
You Deserve To Be Paid for the Value You Create
As a business owner, you carry risk, responsibility, and stress that few people see. You create jobs. You solve problems. You deliver outcomes that matter.
And too often, you do it without charging enough to truly reflect the value you provide.
We’re not here to tell you to double your prices or chase the premium tier. But we are here to encourage you to build your pricing strategy from your numbers, not your fears.
Because the numbers tell the story. And when you know your cost, your margin, and your capacity—you can set pricing that works. For your clients. For your team. And for you.
