How Your Startup Leaves Money On the Table

Quick-hit advice on maximizing your pricing

image by diller

If I had to guess, I’d say your startup is probably selling your product for less than it’s actually worth. I know this because it happens all the time.

It happens to me.

The truth is that most startups do pricing wrong, and they almost always err on the side of underpricing. It’s a common mistake made in the name of customer acquisition. It can seem a noble strategy, even clever, but it almost always catches up to the company in a sneaky way that they don’t realize until it’s too late.

I’m going to be honest with you. You’ve probably been taught to underprice your product. You’ve been told that underpricing is an age-old startup trick: Grab handfuls of market share first, then worry about profits later.

But just because advice is age-old doesn’t mean it’s accurate. You’re likely leaving money on the table.

Pricing is Painful

You’re not alone if you find the pricing process difficult. I hate it too, and I hate it because — just like they say — it actually is throwing darts at a dartboard.

What they don’t tell you is that you must hit the bullseye with those darts. Every time. If you price too high, your startup won’t get enough customers. If you price too low, well, that’s what everyone does — because they’re afraid they won’t get enough customers.

You get better at throwing that dart over time, but if you’ve never played before, or if it’s been a while, your first few throws might not hit the board at all. They might even kill an innocent bystander.

So the natural response is to make the customer an offer they can’t refuse. In a good way. Give them a deal so crazy that you’re practically giving the product away. Sure, that might bring in a million customers, but then a million times a negative is just a massive negative.

On top of that, there are now literally dozens of pricing models like subscription pricing, surge pricing, tier-pricing, and so on, the combinations of which can result in literally hundreds of ways to obfuscate the real price.