Pricing

Core Principle

Charge something. Always. There is a massive difference between free and $1 — the "zero price effect." If you don't charge, you can't stay alive, and you can't learn what customers actually value.

Two Pricing Models

Cost-Based Pricing

• Calculate your costs (hosting, time, materials, payment processing)
• Add a margin (20-50% is typical)
• Best for: physical products, services with clear costs

Value-Based Pricing

• Price based on value to the customer, not your costs
• A feature might cost nothing to deliver but be worth a lot
• Best for: software, digital products, services with high perceived value

Pricing Principles

1. Start low, raise over time. Prices go up as products improve.
2. Pricing is not permanent. Iterate on it like everything else.
3. Tiered pricing is the goal. Economy, business, first class.
4. Never give it away for free as default. Even $1 creates a different dynamic.
5. Free trials are table stakes. Always with a clear path to paid.

Code Example: Pricing Math

Product: $10/month subscription
Need: $2,000/month to sustain
Customers needed: 200
At 1 new customer per business day: ~10 months
Break-even from customer #1: ✅ (profitable immediately)

Common Pitfalls

Pitfall	Solution
Giving product away for free	Charge something — zero price effect is real
Setting price once and never revisiting	Pricing is iterative, not permanent
Confusing free trials with free products	Trials must have clear path to paid
Underpricing due to insecurity	Price based on value to customer, not your costs
Not planning tiered pricing	Introduce tiers as you understand segments

Verification Checklist

• Pricing model chosen (cost-based, value-based, or hybrid)
• Initial price point set with rationale
• Future tier structure planned
• Number of customers needed for sustainability calculated
• Schedule for revisiting/raising prices established