Why Startups Lose Money With Their Initial Pricing

Don’t take wild guesses. Instead, focus on build, market, growth, and scale.

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Have you ever wondered how startups get into that awful spiral of hemorrhaging cash by selling their product for less than it costs to make it?

It’s on purpose. And there’s a good reason for it. But it all starts with their initial approach to pricing.

The science of setting a price for a product is not only sneaky difficult, it’s also surprisingly emotional. In a 20+ year career as an entrepreneur, I’ve gotten into straight-up confrontations with smart people over setting the price of a new product.

So not only can I impart to you what I did wrong, but I can tell you why I did it wrong.

Why pricing a product is so difficult

In order to get pricing less wrong, let’s first understand why it’s never right.

Normally, when you have two equal and opposing forces, there’s going to be tension and difficulty that will eventually result in confrontation. Pricing is extra thorny because there are usually three sides to the pricing equation:

Your sales team will tell you that there is absolutely no way they can sell your full-featured product…