Pauline Healey, founder of Logical BI who is an outsourced CFO and strategic finance consultant shares this opinion piece for business owners.
Let me ask you something that might make you a little uncomfortable.
When you last set your prices, or reviewed them, what were you actually trying to achieve? Were you thinking about what you needed to cover your costs and keep the doors open? Or were you thinking about what would genuinely build a profitable, sustainable business?
For most business owners I speak to, the honest answer is the former. Pricing decisions are often made in a moment of anxiety, competing on price to win a contract, undercharging to seem approachable, or simply copying what competitors appear to charge without any idea of whether that number actually works for them either.
This is pricing for survival. And it's one of the most common financial traps I see businesses fall into.
The Difference Between Surviving and Profiting
Survival pricing is reactive. It asks: "What's the lowest I can charge to get this sale?" or "What do I need to cover my bills this month?" It keeps you busy. It might even keep you solvent. But it rarely builds anything.
Profit-focused pricing is strategic. It asks: "What do I need to charge to cover my true costs, pay myself properly, invest in growth, and generate a return on the risk I'm taking as a business owner?"
The gap between these two approaches is where most businesses quietly haemorrhage money; not through extravagant spending, but through a slow drip of under-pricing that erodes margin month after month.
The Signs You're Pricing for Survival
Here's what survival pricing tends to look like in practice:
You're busy but not building wealth. The diary is full, invoices are going out, but at the end of the month the bank balance looks no different to last quarter. Revenue is moving through the business, not accumulating in it.
You haven't reviewed your prices in over 12 months. Costs go up every year — energy, materials, wages, software, insurance. If your prices haven't moved but your costs have, your margin is shrinking whether you've noticed or not.
You price by gut feel or competitor comparison. "I looked at what others charge and went a bit lower to stay competitive." This is an incredibly common approach and one of the most financially dangerous. You have no idea what your competitors' cost base looks like. Their price might be loss-leading. It might be based on a completely different structure to yours.
You avoid the conversation about price increases. The thought of telling clients your prices are going up fills you with dread. This often signals that you don't have confidence in the value you deliver or that you haven't built the financial case for it.
You're not paying yourself a proper salary. This one is particularly prevalent in service businesses. Many business owners absorb the cost of their own time without factoring it into their pricing properly. If you left your business tomorrow and had to hire someone to replace you, what would that cost? That figure needs to be in your pricing model.
How to Build a Pricing Model That Actually Supports Profit
This doesn't have to be complicated, but it does have to be deliberate. Here's where to start.
Know your true cost of delivery. For product businesses, this means understanding not just the cost of goods but the full landed cost such as packaging, storage, fulfilment and returns. For service businesses, it means understanding the true cost of your time, your team's time, your overheads allocated per client or project. Most businesses are not doing this properly. They have a rough idea of costs but haven't built a clear picture of what it actually costs to deliver each pound of revenue.
Define your minimum viable margin. Once you know your cost base, you need to decide what margin you require, not what's left over, but what you need to run a healthy business, reinvest, and pay yourself fairly. For most businesses, a healthy gross margin is sector-dependent, but the principle is the same: set a floor and hold it.
Factor in your own value and expertise. One of my biggest frustrations as a CFO advisor is watching skilled, experienced business owners charge rates that don't reflect what they're actually bringing to the table. Your years of experience, your reduced error rate, your ability to solve problems quickly, these have real monetary value. Price accordingly.
Build in a buffer for growth and risk. A pricing model that only covers current costs leaves nothing for investment, nothing for the inevitable quiet period, and nothing for unexpected costs. Sustainable pricing includes a deliberate allocation for reinvestment and resilience.
A Question for Finance Teams Too
If you're a finance director or financial controller reading this then this one's for you. How often are you actively reviewing pricing strategy with your leadership team, rather than simply reporting on the margin that results from it? Pricing is not just a sales conversation. It's a financial one. And the finance function is uniquely placed to bring the data, the modelling, and the discipline that good pricing decisions require.
If your business is consistently hitting revenue targets but falling short on profit, pricing is usually one of the first places to look.
Where to Start
If any of this has resonated, the practical starting point is simpler than you might think. Pull together your full cost of delivery for your most common product or service. Add the salary you should be paying yourself. Add your overhead allocation. Add your desired profit margin. Then look at what you're currently charging.
That gap — if there is one — is costing you every single month.
At Logical BI, this is the kind of work we do with business owners and their finance teams regularly. Not just the reporting of what's happened, but the strategic conversations about what the numbers mean for decisions like pricing, structure, and growth. If you'd like a clear-headed look at whether your pricing is working for or against you, I'd love to have that conversation.
Pauline Healey is the founder of Logical BI, an outsourced CFO and financial advisory practice supporting manufacturing and service businesses. A CIMA-qualified accountant with an MBA and over 25 years’ experience, Pauline provides strategic financial guidance without the fixed overhead of a full-time Finance Director, delivered on a 1-2-1 basis. This can be a one-off project or ongoing retainer and if you’re looking to upskill your team then check out the newly launched membership platform Profit Harmony®️ Hub.
To find out how Logical BI can support your growth plans, visit logicalbi.com or call 01772 287400.
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