You're charging too little.

I don't know what you sell or how much it costs, and I'm still confident you're charging too little. Because almost everyone does.

The reason is psychological, not economic. Founders and marketers think about pricing from their own perspective. They think about what it costs to build. They think about what they'd personally pay. They look at competitors and price 20% lower to be "competitive." All of these approaches are wrong because they ignore the only thing that matters: the value the customer receives.

A consultant friend of mine helps e-commerce companies improve their checkout flow. A typical engagement takes her two weeks and increases revenue by $200,000 a year. She charged $5,000. I asked her why. She said, "That's what feels right." Feels right to whom? Not to the client, who would happily pay ten times that for a 40x return.

She raised her price to $30,000. She lost zero clients. In fact, she started getting better clients, because a higher price signal attracted companies that were serious about growth and filtered out the tire-kickers.

This is the counterintuitive thing about pricing: raising your price often increases demand. Not always. But more often than people think. Because price is a signal. A $50 consulting session and a $500 consulting session are perceived as fundamentally different products, even if the advice is the same. The $500 session must be better, people assume, because it costs more.

The classic pricing mistake is cost-plus. You calculate your costs, add a margin, and that's your price. This makes sense for commodities. If you're selling rice, sure. But if you're selling anything with intellectual value — software, advice, creative work, education — cost-plus is madness. The cost of producing a piece of software bears no relationship to its value. Microsoft Office costs maybe $50 per unit to develop and support. It's worth thousands to the businesses that run on it.

The other classic mistake is competitive pricing. You look at what others charge and go a bit lower. This is a race to the bottom. It signals that you have nothing to differentiate you except price. And if price is your only advantage, you will eventually lose to someone with lower costs. Better to position against the alternative and price for the value of the outcome.

The right way to price is value-based. How much is the outcome worth to your customer? Price as a fraction of that value. If your product saves a company 100 hours a month, and their employees cost $75/hour, you're creating $7,500 in monthly value. Charging $500/month is not expensive. It's a bargain.

The hardest part of value-based pricing is believing you deserve it. You do. If you create real value, capture a fair share of it. That's not greedy. That's sustainable. (And if you ever need to change your pricing later, read Pricing Changes Kill Companies first. The change is where most companies get hurt.)