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Posted: Thu 20th Aug 2026
Last updated: Thu 20th Aug 2026
7 min read
One of my clients very proudly showed me his pricing spreadsheet.
He'd tracked his costs to the penny and benchmarked three competitors line by line. He'd tested his price with actual customers and they'd said yes, more than once.
With those three boxes ticked, he thought the job was done. But then I asked him one more question:
"At that price, with those costs, how many units must you sell each month to make sure you can take home the income you actually want?"
He didn't know, because he'd never worked it out.
That fourth question is the one most pricing advice skips. It's also the one that decides if you have a business or an expensive hobby.
Every price requires four separate questions. Get any one of them wrong and the price is incorrect, no matter how carefully you worked out the other three.
Most business owners can rattle off the first three without much prompting. It's the fourth one they leave out, usually because it's likely to produce an answer they don't want.
Here are those four questions:
What does it actually cost you to produce or deliver this? Not roughly, and not what it cost when you started. What it costs now, fully loaded, including the time no-one bills for.
What do your competitors charge and what do you get for the difference? Cheaper than them means something specific. So does more expensive. Know which one you are, and why.
What will your customers actually pay? Not what you hope they'll pay. What they've shown you, through what they buy, what they hesitate over and what they walk away from.
Can you actually sell enough of it, at that price, to hit the profit you need? This is the one almost no-one does. It's also the only one of the four questions that tells you whether the business works.
The first three factors tell you what price you can defend.
The fourth tells you whether that price, multiplied by realistic volume, adds up to something you can actually live on.
I've sat across from business owners who had carefully justified prices, backed by real cost data, competitor research and customer feedback, who still weren't making a living.
Every individual number looked reasonable, but no-one had ever multiplied it out.
If your price is right but you can only realistically make and sell 40 units a month, and 40 units doesn't cover your costs plus the income you need, the price isn't actually right.
You haven't finished the maths.
This isn't a motivational question – it's arithmetic.
Work out your fixed costs for the month. That's everything that goes out regardless of how much you sell.
Work out your margin per unit at your proposed price. Divide one by the other. That number is how many units you need to sell just to break even.
Then add what you actually want to earn on top and divide again. That's your real target.
Now look honestly at whether you can achieve that number, given your market, your capacity and the time you have. Not whether it's possible in theory. Whether you, specifically, in the next 12 months, can actually hit it.
Here's a quick example.
Fixed costs for the month, rent, salaries, software, insurance, come to £4,000.
At the proposed price, each unit carries £25 of margin after variable costs.
Four thousand divided by 25 is 160 units, just to break even.
Add the £3,000 a month you actually want to take home and the real target is 280 units a month, not 160.
Now the honest part… Can this business actually produce, deliver or sell 280 units a month, given the hours available, the market size and the capacity of the team?
If the realistic ceiling is 150, the price isn't right, regardless of how carefully the business researched its costs, competitors and customers.
There's an understandable reason. The first three factors feel like research, something you can sit down and work out at a desk.
The fourth feels like a forecast. And forecasts are uncomfortable because they can turn out to be wrong.
But an uncomfortable number now is considerably cheaper than the same discovery 18 months in, after the business has been running at a loss dressed up as a slow start.
If the honest answer is no, you have three real options and pretending is not one of them.
Raise the price, if factors two and three will bear it, so you need to sell less to hit the same number.
Cut the cost base, so the same volume produces more margin.
Accept that what you're running is not yet a business that supports the life you want it to. That isn't a failure. It's information you can act on, which is considerably better than not knowing.
I say this to my clients more often than they expect.
If you can't sell enough of what you offer, at a price the market will actually bear, to hit the profit you need, you don't have a business. You have a hobby that happens to send invoices.
That isn't a criticism. Plenty of good businesses started as exactly that and plenty of people are perfectly happy keeping it that way.
But know which one you're running. Don't confuse the first three ticked boxes for the fourth one being answered.
The four factors aren't equally hard to work out and they're not optional extras to each other.
Cost tells you the floor.
Competitors and customers tell you the range above that floor.
Volume tells you whether anything in that range actually pays the bills.
Skip any one of the four and the other three are just an exercise.
I'll finish by asking you this. Have you actually done the fourth calculation, or have you just checked that the first three feel reasonable?
