Am I Pricing for Profit — or Just Revenue?

Pricing is the highest-leverage number in a business: it flows to the bottom line with no additional cost attached. Yet it is often set by copying competitors, adding a habitual markup, or fearing the customer conversation — everything except analysis.

The pricing question is really a margin question: after the true, fully loaded cost of delivering your product or service, what does each sale actually contribute?

Start by separating markup from margin — a 50% markup is only a 33% margin — and by computing contribution margin properly: price minus all variable costs of delivery, including the labour hours that owners habitually undercount. Then run the discount arithmetic on your own numbers: at typical small-business margins, small discounts require enormous volume increases to break even, while modest price increases survive surprising amounts of customer loss. The asymmetry almost always favours the increase.

Then price the offer, not just the unit: segment customers by the value they receive, structure good-better-best tiers so buyers self-select upward, and put a price on the rush jobs, the scope creep, and the difficult accounts you currently absorb for free. A business that knows its margin by product, by service line, and by customer stops chasing revenue that costs money to earn.