Small business
Pricing your products
How to find your true cost floor, read what the market will bear, and stop copying the neighbour's price without knowing their costs.
Most small-business prices are set by one of two methods: copying the stall next door, or guessing what feels fair. Both can bankrupt you politely — a price that undercharges loses money on every sale and makes it up in exhaustion. Pricing is a calculation with a judgement on top, in that order.
First, the floor — your true cost
The floor is what one unit truly costs you, and it is always higher than the purchase price. Count the item, its share of transport, its share of rent and licences, payment and airtime costs, spoilage and breakage — the tomatoes that rot are paid for by the ones that sell — and your own time at the wage you pay yourself. Only your records can supply these numbers honestly; feelings always undercount. Selling below the floor is not competing, it is quietly paying customers to take your stock. Knowingly selling one item near the floor to bring people in can be a strategy — but only the records can tell a loss-leader from a leak.
Then, the ceiling — what the market bears
- The ceiling is set by customers, not costs: what this product is worth to this buyer, here, today. High costs do not raise it — a price above the ceiling simply does not sell, however justified.
- Read it by watching, not asking. What do buyers pay without flinching? Where do they hesitate, bargain hardest, or walk? Small experiments — a slightly higher price on one line for a week — teach more than any opinion.
- Ceilings move: month-end versus mid-month, term time versus holidays, rain, harvest gluts. The market has moods, and the monthly record review is where you catch them turning.
Choosing where to stand between them
Between floor and ceiling sits your judgement. The neighbour's price is worth knowing but never worth obeying — their costs, volumes, and desperation are not yours, and matching a price you cannot afford means importing their business model without checking whether it works even for them. You can also compete without touching the price: reliability, exact change, records a customer can trust, quality that repeats — buyers pay small premiums for certainty every day. And when a customer asks for a discount, trade rather than surrender: a better price for buying more, for regular orders, for cash today — so the discount buys the business something back.
Frequently asked questions
Everyone in my market sells at exactly the same price. Can I really differ?
Where the product is identical, the price usually converges — differ instead on what surrounds it: consistency, cleanliness, credit discipline, speed, stock the others run out of. If your floor sits above the going price even after trimming costs, the market is telling you to change product, volume, or venue — better to hear it from the arithmetic than from the debt.
Should bargaining change how I set prices?
Where haggling is the culture, set the opening price with the expected journey built in — but let the floor be the line that never bends. Bargaining theatre is fine; performing it below cost is the exhausting way to go broke.