“Price with Confidence: The Foundation of Profitable Growth”
Pricing might be the most important financial decision you’ll make in your business—and the one most entrepreneurs struggle with the most. Price too low, and you’ll work yourself to exhaustion without building wealth. Price too high without positioning properly, and you’ll scare away the very clients you want to attract.
Here’s the truth: pricing is more than covering costs. It’s how you position your business, attract the right customers, and build sustainable profitability that supports your family and long-term goals.
💥If You’re Really Stretched: Start Here
Today, calculate your true hourly cost (all expenses ÷ billable hours). Make sure your pricing covers this plus a profit margin. Even this one exercise can save your business from unintentional losses.
I. Know Your Real Costs Before You Price
Before you can set prices with confidence, you need clarity on what it actually costs to deliver your product or service. Most business owners drastically underestimate their true costs, which explains why so many struggle with profitability despite staying busy.
For Product-Based Businesses:
- Raw materials & components
- Labor for manufacturing/assembly
- Packaging & shipping materials
- Equipment depreciation, production utilities
For Service-Based Businesses:
- Your time (at your target hourly rate)
- Team/subcontractor labor
- Tools & software for service delivery
- Travel, materials, or project-specific costs
Often-Overlooked Costs:
- Insurance, licenses, and certifications
- Marketing and sales expenses
- Admin time: proposals, invoicing, customer service
- Professional development & training
- Taxes and employee benefits
Examples of Billable vs. Non-Billable Items
Understanding the difference between billable and non-billable work is crucial for accurate pricing.
Billable (Directly Tied to Client Projects/Revenue)
- Time spent performing the actual service (e.g., bookkeeping hours, graphic design work, coaching sessions)
- Materials or supplies used specifically for a client project
- Subcontractor or freelancer work billed back to the client
- Travel directly tied to a client project (on-site visits, installation trips)
- Project-specific software or licenses (e.g., CAD file for an architecture job, project-specific analytics tool)
Non-Billable (Necessary for Business, But Not Directly Charged to Clients)
- Administrative tasks (invoicing, scheduling, payroll, responding to general emails)
- Marketing activities (social media posts, website updates, networking events)
- Client proposals, estimates, and discovery calls (unless you charge consultation fees)
- Professional development (training, certifications, courses)
- Internal meetings and business planning
- Legal, tax, or compliance tasks
- Equipment maintenance and general supplies
👉 Quick Win: Spend one week logging everything you do, then label each task as billable or non-billable. Most small business owners are surprised to see that 30–50% of their time is non-billable—and that’s why pricing needs to account for it.
💡 Havins’ Advantage: Many businesses undercharge because they forget hidden costs. We help clients uncover those blind spots—most service businesses need to charge 2.5–3x their direct labor rate to achieve healthy margins.
🔑 Key Takeaway: Pricing is not just about the job in front of you—it’s about sustaining your whole business. Every price must contribute to covering your total operational costs and generating profit.
II. The 3 Core Pricing Strategies
Most successful businesses use elements from all three strategies, but understanding each helps you choose the right approach for different situations.
1. Cost-Plus Pricing (The Foundation)
- Formula: (Direct Costs + Overhead + Profit) ÷ Units = Price
- Best For: new businesses, commodity-style services, industries with standard markups like bakeries, retail shops, and basic contractors.
- Pro: Simple and ensures all costs are covered.
- Con: Doesn’t capture the true value you may be providing.
Example:
- Labor: $50/hr
- Overhead: $25/hr
- Profit Goal: $35/hr
- Rate: $110/hr
2. Value-Based Pricing (The Growth Strategy)
- Method: Price based on the value created, not your cost.
- Best For: specialized expertise, clients who see measurable ROI, premium positioning like marketing agencies, consultants, health & wellness, and niche professionals (IT, architects, legal).
- Pro: Aligns price with transformation you deliver.
- Con: Requires strong confidence and clear communication of results.
Example:
- Your campaign grows client revenue by $50,000.
- You charge $10,000–$15,000 (20–30% of value created).
Key Questions:
- What problem do you solve for customers?
- What’s the financial impact of that solution?
- How much would it cost them to solve this problem elsewhere?
- What’s the cost of NOT solving this problem?
3. Competitor-Based Pricing (The Market Check)
- Method: Research competitors, then position above, within, or below market.
- Best For: Crowded industries where customers compare heavily like stylists, restaurants, gyms & fitness studios, e-commerce (cup makers, candles, jewelry).
- Pro: Keeps you realistic about customer expectations.
- Con: Can lead to “race to the bottom” if you only compete on price.
Positioning Options:
- Premium (10-20% above market): Superior quality, unique features, exceptional service
- Market Rate (within 5% of average): Solid quality, reliable service, good value
- Value (5-15% below market): Efficient processes, minimal frills, competitive advantage
👉 Quick Win: Research 5–10 competitors this week. Build a simple pricing comparison chart (services, features, rates).
💡 Havins’ Advantage: We help small business owners select the right pricing strategy for their stage and industry—often blending elements of each.
🔑 Key Takeaway: Start with cost-plus for your baseline, then transition to value-based pricing as soon as possible, while continuously monitoring your competitors pricing to ensure your positioning remains competitive and strategic.
III. Pricing Psychology & Positioning
How you present pricing is as important as the number itself.
Strategies that Work:
- Anchoring: Show premium package first, making standard look reasonable.
- Bundles: Combine services to increase average sale size.
- Tiers: Offer Good / Better / Best options—most clients pick the middle.
- Odd-Even Pricing: $99 feels cheaper than $100; $2,000 feels more professional than $1,999 for B2B.
👉 Quick Win: Create three distinct pricing tiers this week. Design your middle option as the “best value” while ensuring your basic tier still delivers complete satisfaction and your premium tier includes meaningful upgrades.
💡 Havins’ Advantage: We help businesses craft pricing packages that sell effectively while positioning you as a trusted professional—never a commodity competing solely on price.
🔑 Key Takeaway: Strategic tiered pricing drives clients toward your middle option while protecting your profit margins. Your basic tier should exceed expectations, and your premium tier should offer clear, valuable enhancements that justify the investment.
IV. Communicating Value with Confidence
Clients buy results, not hours. The biggest pricing mistake isn’t charging too little—it’s failing to communicate why your price makes sense. When you can’t articulate your value clearly, clients default to comparing you on price alone. Master this skill, and you’ll never compete on price again.
The V.A.L.U.E. Framework:
- Verify the problem & impact
- Articulate your unique approach
- List specific outcomes
- Understand their decision process
- Explain pricing in terms of value delivered
👉 Quick Win: Practice the V.A.L.U.E. framework this week by recording yourself explaining your service to a hypothetical client. Start with “Here’s the problem you’re facing…” and work through each step. Refine your delivery until you sound confident and natural—no “ums,” apologies, or price justifications. Time yourself; aim for 2-3 minutes maximum.
💡 Havins’ Advantage: We teach service providers how to position themselves as strategic partners, not vendors. Our clients learn to lead pricing conversations instead of defending them.
🔑 Key Takeaway: Confident pricing stems from clear value communication, never from apologizing for your rates. When you can articulate the specific problems you solve and outcomes you deliver, price becomes a natural conclusion rather than an awkward negotiation.
V. Compliance & Legal Considerations
Smart pricing isn’t just about maximizing revenue—it’s about protecting what you earn. Too many business owners focus solely on the sale and forget that poor compliance can wipe out months of profit in a single audit or lawsuit. Building compliance into your pricing strategy from the start saves money and reduces risk.
- Taxes: sales tax, quarterly estimates, etc
- Regulations: licensing, insurance, permits, certifications
- Contracts: payment terms, late fees, IP ownership, liability limitations
👉 Quick Win: Schedule a 30-minute call with your accountant this week to review your current pricing structure. Specifically ask: “Are we maximizing tax efficiency? Should we adjust our pricing to optimize quarterly payments? What deductions are we missing?” Come prepared with your current rate sheet and recent invoices.
💡 Havins’ Advantage: We partner with legal and accounting professionals to ensure our clients’ pricing strategies maximize profitability while maintaining full compliance. We’ve seen too many businesses lose thousands to avoidable tax penalties and contract disputes—we make sure that doesn’t happen to you.
🔑 Key Takeaway: Compliance isn’t optional—it’s a profit protection strategy. Build legal and tax considerations into your pricing from day one to avoid costly surprises that can derail your business growth.
VI. Pricing Mistakes to Avoid
Even experienced business owners fall into predictable pricing traps that can devastate profitability and market position. These mistakes often stem from emotional decision-making rather than strategic thinking. The good news? They’re completely avoidable once you know what to watch for.
The Underpricing Trap:
- Competing primarily on price
- Not accounting for all costs
- Undervaluing expertise and experience
- Fear-based pricing decisions
The Overpricing Pitfall:
- Pricing without market research
- Ignoring competitive positioning
- Failing to communicate value effectively
- Premium pricing without premium delivery
The Inconsistency Problem:
- Different prices for similar work
- Unclear pricing structure
- Frequent price changes without explanation
- No documented pricing strategy
👉 Quick Win: Audit your last 10 client interactions for these red flags. Did you justify your price defensively? Quote different rates for similar work? Skip market research? Identify your biggest vulnerability and address it this week.
🔑 Key Takeaway: Pricing mistakes aren’t just about lost revenue—they train clients to expect discounts, damage your professional credibility, and create operational chaos. Consistent, strategic pricing built on solid research and clear value communication protects your business from these preventable pitfalls.
Transform Your Business with Strategic Pricing
Success with pricing requires shifting from hourly thinking to value thinking. The businesses that thrive don’t just cover their costs—they price strategically to build wealth and create the freedom they started their business to achieve.
Your Pricing Foundation:
- Know Your Worth: Your skills and results deserve fair compensation that reflects the value you create
- Communicate Confidently: Clients must understand what they’re buying and why it matters to their success
- Stay Consistent: Systematize your pricing strategy—never wing it or make emotional decisions
- Embrace Growth: As your expertise and results improve, your prices should evolve to match
🔑 Key Takeaway: Strategic pricing is one of the fastest ways to grow profit without adding more hours. Master these fundamentals, and you’ll be ready for advanced strategies like retainers, performance-based pricing, and strategic price increases.
What’s Next: Advanced Pricing Mastery
Once you’ve mastered these fundamentals, you’ll be ready for Beyond the First Price: Reevaluating & Raising with Confidence We’ll cover:
- Customer Segmentation: How to price for premium vs. price-sensitive clients
- Advanced Models: Retainers, subscriptions, and performance-based pricing
- Strategic Price Increases: When and how to raise rates without losing clients
- Profitability Protection: Maintaining margins while strengthening relationships
🚀 Ready to stop guessing and start pricing with confidence?
Schedule your free consultation today at www.HavinsConsulting.com. Together, we’ll build a comprehensive pricing strategy that protects your margins, positions you as the premium choice, and creates the sustainable, profitable business your family deserves.
⏰ Need immediate implementation support? Email us directly at info@HavinsConsulting.com for access to our Complete Pricing Strategy Worksheet or 4-Week Pricing Implementation Plan.
