The Pricing Mistake 90% of Small Businesses Make

"Cost-plus" pricing: calculate your costs, add a margin, and charge that. It's logical. It's also leaving significant money on the table.

The Problem

Cost-plus pricing is based on your inputs, not on customer value. A plumber who fixes a burst pipe in 20 minutes saved the customer $10,000 in water damage. Charging "20 minutes × hourly rate" misses the entire value delivered.

Value-Based Pricing

The alternative: price based on the value your service delivers to the customer.

Framework:

1. What problem does my service solve?
2. What is the cost of NOT solving it?
3. What outcomes does the customer care about?
4. What would a customer pay for those specific outcomes?

Real Example

A landscaper switching from hourly billing ($65/hr × 4hrs = $260) to "weekly maintained curb appeal" packages ($395/month) — same work, $680+ more revenue per customer per month.

Three Packages Always Outsell One

When you offer a single price, the only question is "buy or don't buy?" When you offer three tiers, the question becomes "which one?"

The Good-Better-Best Structure

Basic ($X): Core service, essential deliverables, no extras

Standard ($X × 2.5): Core service + 2-3 valuable additions, most popular

Premium ($X × 5): Everything + VIP experience, white glove, fastest delivery

Why This Works

1. Decoy effect — the middle option seems like the best value
2. Anchoring — the premium price makes middle seem reasonable
3. Autonomy — customers feel in control of their spending
4. Upsell path — premium exists to capture willingness-to-pay from top customers

The Secret

60-70% of customers choose the middle option when all three are explained equally. Design your most profitable offering to be the "Standard" tier.