Why Your Business Has No Clear Pricing Strategy

Most business owners I meet cannot tell me why their price is what it is. They say something like — 'I checked what competitors charge and stayed a little lower' or 'I calculated my cost and added 20 percent.' Both answers tell me the same thing: there is no real pricing strategy. There is just a number that felt safe at the time.

This is one of the most common and most damaging patterns I see across Indian MSMEs — whether it's a manufacturer in Coimbatore, a clinic in Pune, a logistics company in Delhi or a boutique retailer in Bengaluru. The business is working hard, volumes are decent, the owner is busy all day. But when you look at the numbers at year-end, the profit is thin. Sometimes embarrassingly thin. And pricing is almost always part of the reason.

Here is the core problem. When you price based on what competitors charge, you are assuming your competitors have figured it out. Most of them have not. You are anchoring your business to someone else's confusion. And when you price purely on cost-plus, you are only recovering what you spend — you are not capturing the value you actually deliver. A CA firm that saves a client twelve lakhs in taxes should not be charging on hours logged. A packaging manufacturer that reduces rejection rates for a pharma client is not just selling boxes. The value is different from the cost. Your price needs to reflect that.

The second problem is inconsistency. Many founders have different prices for different customers — sometimes without even realising it. One client got a discount because he asked. Another because the founder was trying to close month-end numbers. A third because she seemed like she might refer more clients. Over time, your pricing has no logic. Your team cannot quote confidently. Your customers compare notes and feel cheated. You feel guilty charging your real rate. I have seen this destroy trust faster than any competitor ever could. If you want to understand the full picture of how inconsistency affects your business beyond just pricing, a one-to-one consultation is often the fastest way to diagnose what is actually going on.

So how do you fix this? Start by answering three questions honestly. First: what does it actually cost you to deliver this product or service — including your time, overheads, rework, follow-up and the mental load you carry? Most founders undercount costs significantly. Second: what specific outcome or result does the customer get from you? Not features. Outcomes. 'We print brochures' is a feature. 'Your sales team walks in with materials that make them look credible to enterprise buyers' is an outcome. Third: who is your actual target customer and what do they already spend on similar problems? A premium buyer and a price-sensitive buyer are different markets. You cannot price for both with one number.

Once you have those three answers, you can build what I call a pricing floor and a pricing ceiling. The floor is your true cost plus a minimum acceptable margin — below this, you do not take the work. The ceiling is what the highest-value version of your offer can justify, based on outcomes and the buyer's context. Between these two numbers is your pricing range. Your job is to move clients up the range, not down. This is not about being greedy. It is about building a business that survives and grows. I cover frameworks like this in detail in business growth workshops designed specifically for MSME founders who are trying to get off the cash-flow treadmill.

One practical thing you can do this month: audit your last ten invoices. Look at what you charged, what it actually cost you to deliver and what the client's outcome was. You will almost certainly find two or three jobs where you undercharged badly. Not because you were foolish — but because you had no framework. You were guessing. Once you see the pattern, you can start correcting it systematically. Raise your floor. Stop discounting without a reason. Build tiered packages if your service allows it, so customers self-select rather than negotiating every single time.

Pricing is also a positioning signal. A brand that is always the cheapest option trains buyers to see it as a commodity. The moment a cheaper option appears, those buyers leave. But a brand that holds its price, explains its value clearly and occasionally says 'this project is not the right fit for us' builds a very different kind of reputation. I have seen manufacturers lose low-margin clients and within six months replace them with fewer, better clients who pay on time and do not haggle. It required confidence and a short-term discomfort. But it changed the business permanently.

If you are tired of quoting and hoping, if every sales conversation turns into a discount conversation, if your margins look fine on paper but never show up in your bank account — the problem is almost never your product or your effort. It is usually your pricing structure and the story you tell around it. That is fixable. Start this week by writing down your actual floor. Know the number below which you will not work. That single decision will change more conversations than any new marketing campaign ever will. You can learn more about how I work with founders on exactly these kinds of business decisions on the about Abhijit page.