---
title: Pricing for Profit
summary: Set a defensible price on every offer using a margin floor, a value anchor, and the band between them.
est_minutes: 16
sort: 4
slug: foundation-pricing-for-profit
---

**Why This Lesson Exists**

Most operators do not actually set their prices. They match them.

They see what a competitor charges. They pick a number slightly above or slightly below. They stop. This is not pricing. This is copying.

The problem with copying is that the competitor you are matching does not know your costs, your value, or your margin. They have their own structure. When you match their number, you import their entire financial reality, minus the parts of it you can actually see.

The result is predictable. Operators price to stay competitive and quietly run margins that cannot sustain the business. They deliver real value and capture a fraction of it. They discover the gap the same way they discover most financial gaps: at the worst possible moment, usually when a cost goes up and they cannot pass it through.

You cannot outwork bad pricing. You can only fix it.

This module will not turn you into a pricing consultant. It will turn you into an operator who can set a defensible price on every product or service in your business, with a clear floor, a clear ceiling, and a specific band you operate in between them.

**The Margin Floor And Value Anchor**

The framework is called the Margin Floor and Value Anchor. Two numbers per offer. One defines the lowest price you can afford to take. The other defines the highest price the market will support. Real pricing happens in the band between them.

The floor protects the business. The anchor captures the value. The band is where you price.

Meet Marcus. He runs an HVAC service business in Austin. $1.2M in revenue last year, eight employees, six years in business. He does residential service and maintenance, mostly repair calls and seasonal tune-ups. He has been pricing the same way for six years. He looks at what three competitors charge, picks a number that sits roughly in the middle, and adjusts by about five percent every spring. That is his whole pricing process.

Last month, Marcus ran the Module 1.3 P&L read for the first time. His gross margin came in at forty-one percent. Three years ago it was fifty-two percent. He has been losing eleven margin points without knowing it, and his competitor-matched pricing was the reason.

**Part One: The Margin Floor**

The Margin Floor is the lowest price a product or service can go without violating your business model. It is built from two inputs. Your true cost to deliver, which includes not just materials and labor but a fair allocation of operating costs. And your target gross margin, which comes from your M03 P&L read.

The formula is simple: Margin Floor = true delivery cost divided by (one minus your target gross margin). That gives you the minimum price.

For Marcus:

- True cost on a typical service call: $145 (parts, technician time, fuel, scheduling overhead).
- Target gross margin, based on the HVAC industry and his M03 read: 52 percent.
- Margin Floor = 145 / 0.48 = $302.
- Any service call priced below $302 is a call that costs him money.

**Part Two: The Value Anchor**

The Value Anchor is the highest price a buyer will pay for the outcome your offer delivers. It is built from a completely different input. Not your cost. Not your competitors. The value the buyer receives.

For Marcus, a broken air conditioner in an Austin summer is not a two-hundred-dollar problem. It is a twelve-hundred-dollar problem if the food in the fridge spoils, the pet is in distress, and the family cannot sleep through a hundred-degree night. What Marcus delivers is restoration of comfort and function in under four hours. The Value Anchor on an emergency service call is closer to four hundred and fifty to five hundred and fifty dollars, because that is what the outcome is worth to the buyer.

**Part Three: The Pricing Band**

Real pricing lives in the band between the floor and the anchor. For Marcus's emergency service call, the floor is $302 and the anchor is $500. His actual price should be in that band. Four twenty-five, four fifty, four seventy-five. Where he lands in the band depends on segment, urgency, and how much of the value he wants to share back with the customer.

The crucial move is the math:

- Marcus currently charges $325 on a competitor-matched basis.
- That gives away $125 of capturable value on every emergency call.
- Over 800 emergency calls a year, that is $100,000 of missed margin.
- His P&L will never show it, because the number that was never captured never appears as a line item.

**The Three Pricing Tests**

Three tests. Run each offer through all three before you set a price.

1. The margin test. Is the price above the Margin Floor? If no, you are pricing below the cost of running the business. Raise to the floor before anything else.
2. The value test. Is the price below the Value Anchor? If no, you are pricing above what the market will support for this specific outcome. Adjust the offer, the audience, or the price.
3. The band position test. Where does your current price sit in the band? Closer to the floor means you are sharing most of the value back with the buyer. Closer to the anchor means you are capturing more of it. Neither is wrong by itself. What is wrong is not knowing where you are.

**Common Failure Modes**

Three traps to catch.

1. Pricing off competitors. Competitors are a data point, not a standard. Their price reflects their costs, their value, and their stage, not yours. Use their pricing to understand the market band, not to set your own number inside it.
2. Ignoring the Margin Floor. Operators who cannot name their Margin Floor always discover it too late. Every underpriced offer is profitable on gross, meaning it covers its direct cost, and quietly unprofitable on net once you allocate operating costs. The Margin Floor is how you stop that.
3. Anchoring on cost when you should anchor on value. Cost sets your floor, not your price. A service that costs you $145 to deliver and creates $1,200 of value for the buyer should not be priced at $200. It should be priced inside the band between its floor and its anchor.

**What To Do Right Now**

The Module Teaching lesson below walks through each part of the framework in depth, with a complete worked example following Marcus as he reprices his top three services and the moves he makes as a result.

The workbook then walks you through the pricing analysis on your own top three offers. Real cost. Real target margin. Real value to the buyer. One sitting. The Tool is the Pricing Band Calculator. Enter your costs, your target margin, and your value estimate. It produces your Margin Floor, your Value Anchor, and your defensible price band for each offer.

This is not market research. Your Value Anchor is an operator estimate. Test it against real buyers before you bet the business on it.

Set aside sixty minutes. Pick your top three offers. Run the framework. Come back to Module 1.5 with defensible prices.

Margin Floor. Value Anchor. The band between them. One operator who can defend every price on their menu.

When the pricing is right, the rest of the pillar gets easier. Module 1.5 funds the business off real margin, not imagined margin. Module 1.6 builds a plan on prices that can actually hold.

So start here. Pick your top three offers. Set the floor. Find the anchor. Price in the band.
