Pricing is one of the decisions new founders find most difficult to get right, and most underestimate its impact. Set a price too low and you undermine perceived value and margin; set it too high and you risk pricing yourself out of a market you have not yet established yourself in. Understanding the main approaches to pricing helps founders make a more informed and deliberate decision from the start.
There are three broad approaches to pricing a product or service. Cost-plus pricing builds from your costs upward, adding a target margin. Competitive pricing anchors to what comparable offerings charge in the market. Value-based pricing sets the price according to the value the customer receives — and tends to produce higher margins when the value can be clearly demonstrated. Most businesses use a combination of these approaches, starting with cost and competitive awareness before testing whether the market will support a value-based position.
Pricing is not a one-time decision — most businesses revisit it multiple times as they learn more about their customers and market. Starting with a price that allows you to test market response and iterate is more valuable than seeking the perfect price before you have customers. Our guides to pricing strategy and value-based pricing cover the key considerations for UK founders setting or reviewing their prices.