Don’t price based on feelings. Price based on strategy.
One of the fastest ways to kill your business before it even starts is by pricing emotionally. You either undercharge because you “just want to get clients,” or overprice with nothing to justify it. Both are bad. Pricing is a skill. Here’s how to build yours.
Step 1: Know Your Minimum Viable Price (Break-Even)
This is the floor — not your final price, but your survival line.
Break down what it actually costs you to deliver what you’re selling. Most new entrepreneurs forget this, and end up doing business for free, or for a loss:
- Fixed Costs:
- Software fees (Canva, Email Hosting, AI Tools, etc.)
- Rent (studio, office, home office expenses, etc.)
- Any other expenses that are the same month-to-month – independent of sales
- Variable Costs:
- Your time (yes, you’re part of the cost)
- Shipping, materials, print-on-demand charges
- Physical goods (product supplies, packaging)
- Transaction fees (Stripe, PayPal, etc.)
- Admin and backend support
- Customer service hours
- Marketing or ad spend
- Any other fulfillment expenses that are tied to a sale
Add these up and tie them to:
- A time frame (fixed costs)
- A number of sales (variable costs)
For example: My fixed costs are $100/mo. My variable costs are $250/sale.
Your fixed costs are your costs to keep the doors open; this cost gets diluted with the more sales you make. Your break even point = fixed costs / no. of sales per month + variable cost per sale. Anything below this? You’re paying people to do business with you.
For example: Lets say you plan to make 1 sale per month. Your break even point per sale is $350 ($100/mo fixed cost / 1 sale + $250/sale variable cost). If you charge anything below $350, you are losing money.
Lets say you plan to make 10 sales per month. Your break even point per sale is now $260 ($100/mo fixed costs / 10 sales + $250/sale variable cost. Your break even point is now $260. Anything below this and you are losing money.
Once you figure out your break even amount, then you add a profit margin—a real one. This is different depending on the market you are in, and requires some price research on your end – some markets allow for a 1,000% profit margin and some allow for only a 10% profit margin. Study your market and price accordingly. Even if it feels high, remember: You need room to breathe, scale, or run ads later.
Protip: You can add value to your offer to increase your profit margins. Value can come in the form of anything that enhances the customer experience; this can be a simple PDF guide, a video how-to, a shortcut guide, or an experiential add-on. Be creative and think about how you can stack your offer to include things that make it better, faster, or stronger. Many people will pay a premium for a better customer experience. Think of ways you can eliminate stress, doubt, or angst in your customers during their entire fulfillment journey.
Example: an e-commerce store charges a premium for items that people can buy cheaper elsewhere, because they communicate the customer order status every step of the way, eliminating doubt and angst about orders. This is a process that can be automated. Use automation to create high value add-ons that you can charge more for.
Step 2: Know the Market
Don’t guess. Don’t assume. Research.
Your market will tell you what people are already paying—this helps you understand what’s normal, what’s premium, and where you can fit.
- Look up 5–10 competitors or adjacent offers.
- Identify:
- What they’re charging
- What’s included (deliverables, bonuses, access, etc.)
- Who they’re targeting (budget buyers, mass market, high-end)
This helps you reverse engineer what people pay for and how to differentiate. Are they selling convenience, luxury, speed, or results?
Example: Two people might sell wedding planning. One charges $800, the other $5,000. The difference isn’t time—it’s positioning.
Don’t copy their prices—use them to define your lane, and determine what you need to include in your offer to get to these pricing levels, or surpass them.
Step 3: Anchor with Value, Not Time
People pay for outcomes. Not your hours.
If it takes you 2 hours or 20 hours to get a result—but the result is life-changing—it doesn’t matter. You price based on what the result is worth to them.
Ask yourself:
- What does this help them gain, save, or avoid?
- What would they spend to solve this pain in another way?
- What happens if they don’t fix this?
Then you’ll understand the value gap between the problem and your solution—and you’ll stop pricing based on insecurity.
Protip: The more painful the problem, the more you can charge to solve it.
Step 4: Choose a Simple Pricing Model
Clarity = Confidence. Confusion = Lost Sales.
Your pricing model should be so easy to understand, they could explain it to someone else in one sentence.
Here are the main ones:
- Flat Rate – One-time, fixed fee for a product or service.
→ Great for beginners, simple services, or clear deliverables. - Tiered Pricing – Three price points: basic, premium, VIP.
→ Works great for coaching, consulting, templates, or digital products. People often choose the middle tier. - Hourly – Not recommended unless absolutely necessary.
→ You’re capping your income and selling time, not outcomes. - Value-Based – Price based on ROI or transformation.
→ Harder to sell but powerful if you can prove results (ideal for consultants, marketers, or service-based experts).
Keep it clean. One offer. One price. Then optimize from there.
Step 5: Test, Adjust, Repeat
Pricing is a process. Not a one-time decision.
Your first price will not be perfect. Good. That’s part of the game.
- Test a price for 10–20 sales.
- Track your close rate (how many people say “yes”).
- Raise your price if everyone buys without hesitation.
- Drop bonuses or tighten scope if people hesitate.
- Keep refining your offer to justify premium pricing.
If no one complains about the price, you’re probably too cheap.
Over time, your pricing should rise as your:
- Reputation grows
- Testimonials stack up
- Offer becomes more refined
- Results become repeatable
- You niche down
Bonus Framework: The Alex Hormozi Offer Formula
Want to charge more and have people feel like they’re winning? Use this formula:
Value = (Dream Outcome × Perceived Likelihood of Success) / (Time Delay × Effort & Sacrifice)
Let’s break it down:
- Dream Outcome: How BIG is the result you’re promising?
- Perceived Likelihood of Success: Do they believe you can get them there?
- Time Delay: How FAST can you get them the result?
- Effort & Sacrifice: How HARD will it be for them?
To raise your prices, increase the top (outcome + certainty) and decrease the bottom (delay + effort).
Action Plan
Here’s your cheat sheet:
✅ List all your hard + soft costs
✅ Calculate your breakeven + profit margin
✅ Research 5–10 competitors
✅ Write out your value (what it helps them do/save/gain)
✅ Choose a pricing model (flat, tiered, value-based)
✅ Launch, track, and adjust
✅ Use the Hormozi formula to refine your offer over time
