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The Importance of Pricing For Profit

Posted on November 13th, 2017
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When it comes to setting prices for your products and services, you may hesitate to demand what you really want. Some business owners believe that having the lowest and most reasonable pricing will help them beat out the competition and land more work.

Don’t make this mistake. When you price everything at a bargain rate, it can backfire terribly and hurt your cash flow and the reputation of your business.

Instead, you need to price for profit. Here’s why this is super important.

Perceived Value

The pricing you set for your products and services send a message to customers and clients about the perceived value. For example, while people tend to love sales and discounts, if you set your prices too low, people may feel like they’re not getting a high-quality service.

You can see a clear example of this with hot tech products like the iPhone. People are complaining about how expensive the new iPhone is, but if it were priced at $150, they would also complain and raise an eyebrow. A lower price for that product raises concern in regards to quality and value and it also makes it less of an ‘exclusive’ product.

This could affect your brand’s reputation and image in the industry. With prices that are too low, you may also attract the wrong type of customer who doesn’t really see the value in what your business stands for and that could open up a whole new can of worms.

Earning a Profit Means Your Business is Profitable

Believe it or not, people want to buy from profitable businesses that are making money. I know it’s a weird concept to grasp, but if other people are spending money on X, it makes the next person want to as well.

In other words, bragging about not being able to take a paycheck in the last 12 months is not the best idea.

Who would want to go to a business that is about to go bankrupt? And who would hire a freelancer or agency who isn’t making any money? Not pricing for profit means you have no profit and that will raise a red flag among customers and clients.

You Want To Cover All Your Expenses With Ease

It’s no secret that entrepreneurs have a ton of expenses. You’ve got operating costs, taxes, medical and retirement expenses and your own personal budget if your business is helping to support your household.

You want to add up all your monthly expenses and operating costs while accounting for taxes before you add on another 5% – 10% for profit.

Setting up this picture can help you accurately price your products and services and ensure you don’t end up in the red each month.


At the end of the day, you want your business to be profitable and charge a premium price for your products and services that make you feel happy and satisfied. Charging too low can pose many problems like you attracting the wrong customers or even no customers at all, feeling overworked and burnt out easily, and not really being able to get ahead with your business.

If you feel like you haven’t really been pricing for profit, take time to determine your minimum rate per product or service after adding up all the monthly expenses you have (personal and business), then divide that amount by the hours you can reasonably work each week. Then, add to that rate (based on what’s most comfortable to you) to create a buffer for profit.

Choncé Maddox

Choncé Maddox

Choncé Maddox is a debt expert. She helps ambitious millennials and Generation Z get our of the mounds of debt they are in following college. In 2015 she realized she couldn’t afford to do her own laundry, she was so broke. She had to make a change. Over the next three years she personally tackled $50,000 in debt and became debt free. She teaches others her passion since.

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