How to set prices in a new business: The correct method

Author: Mihai Gusa

Setting the price is one of the most difficult decisions at the beginning of a business. Most beginners instinctively choose what seems safer: a very low price. The reasoning is simple—if it is cheaper than the competition, people will buy. In practice, this strategy creates more problems than solutions.

Why Low Prices Destroy a Business

A price that is too low does not only attract more clients; it attracts the wrong type of clients.

Constant negotiation appears. Extra requests increase. Respect for your time decreases.

Income becomes insufficient to sustain the activity.

The business does not fail from lack of demand, but from exhaustion.

Low pricing is not a safe strategy. It is a slow failure.

What You Are Actually Pricing

The first important rule is not to set the price based on competitors but on value.

Clients do not buy hours. They buy results.

If your service:

• saves time
• reduces stress
• generates money

then the value is higher than the time you spend.

The price must reflect usefulness, not effort.

Why Hourly Pricing Fails for Beginners

Many calculate pricing based on personal income needs.

They divide desired monthly income by working hours and get an hourly rate.

This approach is incomplete.

A business is not only execution. It includes:

• communication
• administration
• marketing
• time without clients

If these are not included, the pricing becomes unsustainable.

A Better Method: Pricing Per Outcome

A more effective approach is pricing per service or per outcome.

Instead of selling time, you sell a result.

Clients understand clear packages better than hourly uncertainty.

This reduces negotiation and increases perceived professionalism.

A Simple Pricing Formula (Practical Model)

You can use a basic structure.

Start with:

• total time required (including communication and admin)
• desired monthly income
• realistic working capacity

Then adjust based on:

• value delivered
• client type
• market context

The result is not a fixed number. It is a starting point.

Example: Basic Service Pricing

If a service takes 10 hours total, but you also spend time on communication and management, the real effort may be 15 hours.

If you aim for 2000€ per month and can realistically sell 100 hours, your base rate is 20€/hour.

But this is only the minimum.

If the service generates significant value for the client, the final price should be higher.

Why Packaging Increases Profit

Packages simplify decisions.

Instead of:
"20€/hour"

you offer:
"Website setup – 800€"

The client understands the result.

You control the structure.

Packages:

• reduce negotiation
• increase clarity
• improve positioning

The Role of Positioning in Pricing

Price communicates a message.

A very low price suggests:

• insecurity
• lack of experience
• low quality

A clear, realistic price signals:

• confidence
• structure
• professionalism

Clients do not always choose the cheapest option.

They choose the most reliable one.

How to Know If Your Price Is Correct

Client reactions are the best indicator.

If clients accept immediately without questions, the price is too low.

If everyone refuses, the price may be too high or poorly explained.

A correct price creates:

• questions
• discussions
• reasonable acceptance

Balance matters more than perfection.

Why You Must Define Scope Clearly

A price works only with clear boundaries.

Without definition, extra requests appear.

These destroy profitability.

You must define:

• what is included
• what is not included
• delivery conditions

Clarity protects both sides.

When and How to Increase Prices

Pricing is not fixed.

As experience grows, prices must increase.

Indicators for increase:

• demand grows
• work becomes easier
• results improve
• recommendations appear

Gradual increases improve income without increasing workload.

Why Higher Prices Can Reduce Stress

There is a common fear: higher price = fewer clients.

In reality:
higher price = better clients.

Clients who pay more:

• respect your time
• communicate clearly
• require fewer corrections

Lower price often creates more work, not less.

Common Pricing Mistakes

The most common mistake is copying competitors.

Another is underpricing due to fear.

Many also fail to include hidden time.

Some accept all requests without limits.

Finally, some never adjust prices after gaining experience.

These mistakes reduce long-term sustainability.

A Simple Pricing Strategy for Beginners

Start with:

• a clear service
• a fixed package
• a realistic price

Test with real clients.

Observe reactions.

Adjust based on real data.

This creates a pricing system, not guesswork.

Frequently Asked Questions

Should you start with a low price? No.

Should you copy competitors? No.

Is hourly pricing good? Rarely at the beginning.

How often should you increase prices? As demand and experience grow.

Conclusion

Price is not just a number. It is part of business strategy.

Setting it correctly protects your time, attracts suitable clients, and creates stability.

A business becomes sustainable not through heavy work at low prices, but through balance between value and reward.

Those who price correctly grow.

Those who price emotionally struggle.