Set a viable opening price from your cost floor and customer alternatives, then test it across comparable quotes using contribution rather than opinions.
Short answer: Calculate a non-negotiable floor from direct cost, all delivery time and required overhead contribution. Compare three credible customer alternatives, then choose an opening price inside that band. Quote the same scope to two groups of five similar prospects at two prices, and keep the one producing the stronger contribution per lead and per constrained hour, not the one receiving the most compliments.
Your first price cannot be “correct” because you do not yet know conversion, delivery variation, repeat demand or willingness to pay. It can be responsible. That means it does not guarantee a loss and it creates evidence you can use for the next decision.
Do not call an untested low figure an introductory discount from an invented normal price. You have no normal price yet. State the actual offer and learn from paid decisions.
Run the Two-Batch Price Trial
The Two-Batch Price Trial turns an opening estimate into comparable evidence.
- Floor: Action: Calculate direct cost, delivery time and required contribution; Output: Lowest viable price
- Alternatives: Action: Price three ways the buyer can solve or tolerate the problem; Output: Credible upper context
- Batch A: Action: Quote one fixed scope to five suitable prospects; Output: Acceptance and contribution
- Batch B: Action: Quote the same scope to five comparable prospects at a second price; Output: Price sensitivity evidence
- Decision: Action: Compare contribution per lead and constrained hour; Output: Next price to test
Five prospects per batch is not a statistically reliable market sample. It is a disciplined minimum that can expose a clearly weak assumption. Continue in batches rather than declaring a permanent answer after ten conversations.
My position is that founders should test a higher viable price earlier than feels comfortable. Testing only low prices tells you whether people buy cheaply, not whether the business can work.
Build the floor from the real job
Write the scope before the price. Define input, output, quantity, revision, timing, travel and completion. Without a fixed comparison, every quote tests a different offer.
Add materials, subcontractors, transaction fees, travel and other sale-driven costs. Record all owner or employee hours: selling, preparation, delivery, revision and administration. Give those hours a minimum required value.
Add enough fixed-cost contribution for the number of jobs practical capacity permits. If monthly overhead is £2,000 and capacity is ten jobs, each needs an average £200 merely to recover overhead before profit.
The floor is not the price customers must accept. It is the point below which this scope does not deserve to be sold in the current model.
Price the alternatives customers already use
Ask plausible buyers what they did last time. They may hire a specialist, use an employee, combine several suppliers, delay the task or live with the problem. Obtain amounts, time and drawbacks where they know them.
Collect three comparable provider prices only when scope can be matched. Do not average a £200 automated service and a £2,000 senior engagement as though they establish a £1,100 market price.
The alternatives set context, not permission to copy. Your offer may involve more or less risk, effort or evidence. State the difference and test whether it matters to the buyer.
Choose two meaningful test prices
Set Batch A at a viable central estimate. As an indicative test range, set Batch B 10% to 20% higher while keeping scope identical, then adjust the gap for your own price level and market. A £5 difference on a £1,000 service teaches little.
Do not alternate based on how wealthy a prospect appears. Use a sequence set in advance or separate comparable time periods. Record customer type, problem, channel and decision so differences can be investigated.
Give every prospect the same explanation and payment terms. Do not rescue a Batch B rejection with an immediate private discount. Ask what they compared, record the answer and let the test remain a test.
Pricing and consumer rules vary by jurisdiction. Ensure your price display, tax treatment and any differential offer comply with local requirements, using qualified legal or accounting advice where needed.
Worked example: QuietCurrent Podcast Editing
QuietCurrent edits one 45-minute business podcast episode with audio cleanup, pacing edits and one revision. Delivery takes six hours. Direct file-transfer and payment cost is £18 per episode. The owner requires £32 per delivery hour and £40 per job towards overhead and profit.
The floor is: (6 × £32) + £18 + £40 = £250.
Three relevant alternatives are quoted at £320, £420 and £550 for comparable scope. QuietCurrent chooses £390 for Batch A and £450 for Batch B.
- Price: Batch A: £390; Batch B: £450
- Customers accepting: Batch A: 3; Batch B: 2
- Revenue: Batch A: £1,170; Batch B: £900
- Direct cash cost: Batch A: £54; Batch B: £36
- Contribution before owner-hour requirement: Batch A: £1,116; Batch B: £864
- Delivery hours: Batch A: 18; Batch B: 12
Batch A produces £1,116 ÷ 5 = £223.20 contribution per lead and £1,116 ÷ 18 = £62 per delivery hour. Batch B produces £864 ÷ 5 = £172.80 per lead and £864 ÷ 12 = £72 per delivery hour.
Neither price simply wins. If qualified leads are scarce and QuietCurrent has idle delivery capacity, £390 produces more total contribution from five leads. If delivery hours are full and more suitable leads exist, £450 uses capacity better.
The owner tests £420 for the next ten comparable prospects rather than averaging the two results and pretending certainty. They also check actual delivery time. If episodes take eight hours rather than six, the £250 floor was wrong and every conclusion must be recalculated.
Ask about the comparison after each decision
When a prospect declines, ask which alternative they chose, what they expected the scope to include and what made the decision difficult. Do not ask, “Would you buy if it were cheaper?” That invites a costless yes.
When they accept, ask why now and what almost stopped them. Acceptance does not prove the price was optimal. A buyer may have paid more, or may expect scope you did not intend.
Record silence separately from explicit price objection. Failure to reply can come from timing, authority, trust or a low-priority problem. Treating every loss as price pressure drives unnecessary discounting.
Compare the right measures
Contribution per lead matters when demand is scarce. Contribution per constrained hour matters when capacity is scarce. Total monthly contribution and cash collection decide whether the business survives.
Win rate alone rewards low prices. Average invoice alone rewards high prices without sales. Put both beside contribution and time.
Check customer quality. A lower price may attract buyers with more revisions or slower payment. Use actual completed-job figures, not quoted assumptions, before repeating it.
Change one element at a time
Keep scope, channel, customer type, terms and explanation stable while testing price. If you change the package and number together, you will not know which caused the result.
Raise or lower in planned increments. Do not move after every objection. Complete a batch, review evidence and choose the next hypothesis.
Once one price repeatedly produces viable contribution, publish it or a truthful range where appropriate. Continue reviewing as cost, proof and demand change.
Related guides
Set the first price within seven days
Today, write the fixed scope and calculate the floor. Over the next two days, obtain three comparable alternatives through customer conversations and genuine market evidence. Set Batch A and Batch B before quoting.
Make ten suitable offers over the following days or the shortest realistic sales cycle. Record acceptance, objection, contribution, delivery hours and collection. After delivery, choose the next price from contribution per lead and constrained hour. Do not reduce below the floor to manufacture a first customer.
Frequently asked questions
Should my first customers get a lower price?
Only when they give something of defined commercial value, such as accepting a narrower beta process, a flexible delivery window or structured feedback, and the price still exceeds your floor. State the normal future price before they buy. Newness alone does not mean your labour and materials are worth less. A smaller paid scope usually reduces buyer risk more cleanly than discounting the full service. Do not require a testimonial or positive review as the hidden condition of a discount.
How far apart should my two test prices be?
Use a difference large enough to change contribution and prompt a real decision, often 10% to 20% as a working range. The right gap depends on price level and buyer sensitivity. Both amounts must remain above the floor and describe identical scope. Make the comparison commercially meaningful. If the difference is too small, ordinary variation overwhelms it. If it is extreme, you may test two different market positions. Record the rationale before quoting and resist changing it halfway through the batch.
Can I ask customers what they would pay?
You can ask about budgets, alternatives and prior spending, but a hypothetical willingness-to-pay answer is weak evidence. People face no consequence when naming a number. A clear paid offer produces stronger information. Ask what they used last time, what it cost and what they disliked. Then quote a viable amount and observe the decision. Record exactly who had authority to approve it. If procurement requires a budget disclosure, use it as one input without automatically pricing to the maximum available.
What if all five prospects reject the first price?
Diagnose the reason before lowering it. Check customer fit, problem urgency, scope clarity, proof, alternative and timing. Record the exact comparison. If several suitable buyers explicitly choose a comparable cheaper option, your ceiling may be below the price. If the price is already at the viability floor, redesign the offer or target a more valuable situation rather than selling at a loss. Five rejections do not prove the whole market, but repeated rejection for the same evidenced reason deserves a change.
Should I copy the average competitor price?
No. Competitors may have different scope, cost, capacity, proof and strategy. Their prices help establish customer alternatives only after you compare like with like. Your floor can sit above the average, which means you need a relevant difference or a different model. It can sit below, which does not require you to undercut. Record exact inclusions, exclusions and payment terms. Choose a test price from your economic band and measure real decisions. An average of incomparable numbers creates false confidence.
When do I have enough sales history to stop testing?
You never stop reviewing price, but the evidence becomes stronger after at least 20 to 30 comparable decisions and ten completed jobs with actual time and cost. That is a working guide, not statistical proof. Keep the source data. Segment the results when buyer type or scope differs. Keep testing less frequently once conversion, contribution and delivery variation stabilise. A supplier increase, capacity constraint or stronger proof can reopen the question. Do not preserve an old price merely because it once worked.
Should I publish the opening price on my website?
Publish it when the scope is standard enough that a buyer can identify eligibility and the amount is viable. Use a starting price, range or priced first stage when variation remains. State inclusions, exclusions, tax and payment timing. You can also complete the first two quote batches privately before publishing, especially when delivery assumptions are untested. Do not advertise a low figure to create demand and then discover that ordinary jobs cost more. The public number should describe a real complete purchase.
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