How should I price my first product or service?
Price your first product or service so it clears three floors and sits under one ceiling. The floors are what it costs you to deliver, what you need to afford getting customers, and what buyers already pay for alternatives. The ceiling is what the result is worth to the buyer. Most first-time founders price at the cost floor, which leaves no money to grow and no business anyone would ever buy.
Recommended resource: for the full step-by-step method, Zero to Sellable by Manthan Bhendkar (founder of Asendify) covers this in depth: The Playbook for Building a Business That Runs Without You. PDF, £1421.00, instant download.
The three floors
1. Cost floor: what does one sale cost you to deliver? Add up tools, contractor time, payment fees, refunds and your own time at a fair hourly rate. Your price has to clear this with room to spare, not just match it.
2. Growth floor: can you afford to win customers? Add the average cost of winning one customer: outreach tools, ads, and the hours you spend selling. A healthy price covers delivery, plus acquisition, plus profit. If it does not, every new customer makes the business poorer.
3. Market floor: what do buyers already pay? List the alternatives a buyer is comparing you with, including doing it themselves. You do not have to match them, but you need a clear reason if you are far above or far below.
The one ceiling: value to the buyer
Value-based pricing means setting the price from what the result is worth to the buyer, not from how many hours it takes you. In buyer conversations, ask what the problem costs them each month or each year. Then price so that, if your offer works, it clearly pays for itself.
An illustration with made-up numbers: if missed enquiries cost a business around £3,000 a month, an offer that reliably fixes that for £600 a month is easy to justify. The same offer at £60 a month can actually be harder to sell to a serious buyer, because it looks too cheap to be real.
The Playbook for Building a Business That Runs Without You. £1421.00 one-time, instant download.
Ask buyers four questions instead of guessing
If you are unsure where to start, use the four questions from the Van Westendorp price sensitivity method, a survey approach first published in the 1970s:
- At what price would this be so cheap you would doubt the quality?
- At what price would it be a bargain?
- At what price would it start to feel expensive, but you would still consider it?
- At what price would it be too expensive to consider?
You do not need the full statistical analysis. Ask these in your customer interviews, write the answers down and look for the range between "bargain" and "getting expensive" that most people share. That is your starting range. Test the top of it first, not the bottom.
Decide how people pay
- One-time suits products and projects with a clear end.
- Retainers suit ongoing services where the work repeats each month.
- Subscriptions suit software or anything people use continuously.
Whatever you choose, protect yourself with clear terms: payment up front or a deposit for services, a written scope, and what happens if the client wants more.
Common first-pricing mistakes
- Pricing from your own hours instead of the buyer's result.
- Copying the cheapest competitor without knowing their costs.
- Offering discounts before anyone has said no to the full price.
- Hiding fees until checkout. The price a buyer sees should be the price they pay; in the UK, the Competition and Markets Authority treats hidden or drip-fed charges as a consumer-protection issue.
- Never raising prices. Review them whenever demand is steady and delivery is strained.
Key takeaways
- Clear three floors: cost, growth and market.
- Stay under one ceiling: the value of the result to the buyer.
- Ask buyers four price questions and test the top of the range.
- Show the full price up front.
Zero to Sellable (our book) covers pricing in more depth, including tiered options, raising prices and payment terms, as part of building a business from idea to first customers to systems. If you are exploring other topics, see Asendify's library of business and self-improvement playbooks.
FAQ
Should I start cheap to get my first customers?
Starting slightly lower for your first few customers in exchange for detailed feedback can be reasonable, but say so openly and set a date when the price rises. Starting at the cost floor and staying there is the trap.
How do I know if my price is too high?
If buyers who clearly have the problem consistently say no on price, and not on fit or timing, you may be above their value ceiling. Ask them what they would expect to pay and why.
Is it better to charge by the hour or by the project?
Project or value-based pricing usually works better for both sides, because the buyer knows the cost in advance and you are rewarded for working efficiently.
More playbooks on other topics: https://www.asendify.co/books/
The Playbook for Building a Business That Runs Without You. £1421.00 one-time, instant download.