Many businesses struggle to grow, not because they lack customers, but because their pricing is poorly thought out.
A business can be busy every day, receive enquiries regularly, and still not be working. Like, there is money coming in, but it never feels like enough.
Staff feel pressured.
Decisions feel rushed.
Growth feels difficult to sustain.
In many cases, the root of the problem is pricing. Pricing affects a business more than revenue.
It shapes how a business operates, how staff work, and how customers behave.
How Wrong Pricing Hurts Your Business
Imagine you own a small boutique, a food delivery service, or a freelance graphic design business. You set your prices based on what your neighbour charges or what feels “fair.” Sales come in, but at the end of the month, there’s barely any profit left. Or worse, customers complain your things are too expensive and go elsewhere. Sound familiar?
Here are ways pricing can hurt your business:
Too Low Prices Kill Your Profits
Many small business owners set their price low to attract more customers or beat competition. However, if your price doesn’t cover costs (like rent, transport, salaries, inflation, and your own time), you will lose money on every sale.
You work hard but end up being broke.
Too High Prices Scare Your Customers Away
If your prices are too high compared to what people can afford or what others charge, your sales will drop. This is because, customers think, “This is overpriced,” and buy from cheaper options (sometimes lower quality goods or service offering).
Slows Business Growth
Poor pricing just keep you in survival mode but you can’t save to expand, hire more people, or try new ideas.
It Affects Your Staffs
Low profits mean you can’t pay good salaries, give bonuses, or invest in training. Therefore, staff feel the stress because they get delayed pay, no salary increment, extra pressure to sell more. Even good and highly qualified staff leave for better places. Also, the team loses energy, and performance drops
Poor Cashflow
Wrong pricing leads to inconsistent money coming in. You will struggle to pay suppliers, rent, or even yourself. Your business growth stops, and you won’t be able to buy new stock, advertise, or fix problems quickly.
Affects Customer Relationship
When your prices change too often, have hidden fees, or does not match the value, customers begin to feel cheated. They stop coming back or tell others bad things about your business. On the other hand, very low prices can make people think your product or service is cheap and not good enough. Either ways, customer loyalty suffers
How to Set Prices Properly
Setting prices should not be based on guesswork, fear, or what competitors are charging alone. Pricing works best when it is built on clear numbers, real costs, and realistic profit. Below is a standard way to set prices that many businesses ignore.
Step 1: Know Your Real Costs
Before setting any price, a business must understand how much it truly costs to deliver a product or service. Costs usually fall into two groups:
Fixed costs: Costs that stay the same each month. These include rent, internet, salaries, subscriptions, fuel, electricity, and basic tools.
Variable costs: Costs that change based on work done. These include materials, delivery costs, transaction fees, printing, packaging, or freelance support.
Example:
Let’s say a small service business has the following monthly costs:
- Rent and utilities: ₦200,000
- Internet and tools: ₦50,000
- Staff support: ₦250,000
Total fixed costs: ₦500,000 per month.
If the business handles 20 client jobs per month, with ₦25,000 per job (base cost), then ₦500,000 ÷ 20 = ₦25,000 (before profit)
Step 2: Add the Cost of Time and Effort
Many businesses forget to price time properly. Time is not free (and like they say, “time na money 😂”).
If a service takes hours or days to deliver, that time must be paid for. Otherwise, the business ends up working harder without earning more.
Example:
If one job takes 10 hours to complete, and the business values work time at ₦5,000 per hour: 10 × ₦5,000 = ₦50,000
Now add this to the base cost: ₦25,000 (base cost) + ₦50,000 (time cost) = ₦75,000
Step 3: Add Profit (Do Not Skip This)
Profit is not extra money. Profit is what allows a business to grow, rest, improve systems, and survive difficult periods. A simple way to add profit is to apply a percentage.
Common profit margins for small businesses range from 20% to 40%, depending on industry.
Example:
If the total cost is ₦75,000 and the business wants a 30% profit, 30% of ₦75,000 = ₦22,500
Therefore, the final price is ₦75,000 + ₦22,500 = ₦97,500 ≈ ₦100,000
Step 4: Check if the Price Is Sustainable
A good price should answer three questions:
- Can the business deliver this consistently without stress?
- Can staff work without being rushed or overworked?
- Can the business still grow at this price?
If the answer is no, the price is too low.
Example:
If charging ₦60,000 forces the business to rush jobs or take on too many clients, then the price is not sustainable, even if customers accept it.
This is because sustainable pricing protects quality and people.
Step 5: Compare With the Market
Market prices should be used as a reference, not an instruction.
If in a situation where the competitors charge ₦80,000, and your calculated price is ₦100,000, the solution is not always to reduce your price. The solution may be to explain the value better or reduce unnecessary costs.
Pricing should match how the business actually operates, not how others operate.
Growth Becomes Easier When Pricing Is Right
When pricing is aligned with how the business actually operates, pressure reduces. Staff work more sustainably. Customers have clearer expectations. Planning becomes easier.
Pricing does not need to be cheap or expensive. It needs to be fair, clear, and sustainable. When this balance is achieved, growth feels steadier and less stressful.
This is what a standard business article looks like:
Clear paragraphs, full explanations, real examples, and ideas that connect logically.