---
title: Revenue Architecture
summary: Pricing and packaging are the operating decisions that determine who you attract and whether the business runs you.
est_minutes: 20
sort: 3
---

Welcome to Module 2.3.

If Module 2.1 was about which customer you serve, and Module 2.2 was about how they buy, this module is about how they pay. Pricing and packaging are the second-highest-leverage decisions you'll make in revenue architecture. Get this wrong and you under-fund your operations, attract the wrong buyers, and lock yourself into a business that can't pay you what you're worth.

By the end of this module you'll have a locked Revenue Architecture Plan, a real cost-to-deliver baseline, a 3-tier package structure, and a calendared price increase.

**Why Most Operators Get This Wrong**

Most operators inherit their pricing structure by accident. They quoted a price for their first job five years ago. They won the deal. They kept the structure. The business has changed, the pricing has not.

The cost is everywhere. You can't fund the operational hires you need because your margin's wrong. You attract bargain-hunting customers because your price is signaling "commodity." You can't take a vacation because every deal is custom-quoted and only you can build a proposal.

The fix is not "raise prices." The fix is architecture: a deliberate structure that determines who you attract, how you fund operations, and how much of the work runs without you.

**The Six Revenue Architecture Decisions**

There are exactly six decisions inside revenue architecture. Most operators have made all six by accident. We're going to make them on purpose.

**Decision 1: Pricing model.** Hourly, project-based, retainer, subscription, performance, hybrid. The model determines whether your revenue is predictable or feast-or-famine.

**Decision 2: Packaging.** One offer, three offers, or a menu. The number of options determines decision speed and average order value.

**Decision 3: Anchor.** The price point you use to make your target price look like the obvious choice. Anchor missing = price always feels expensive.

**Decision 4: Recurring revenue ratio.** What percentage of your monthly revenue is contracted and predictable vs newly-sold each month. Below 40% recurring, the business runs you. Above 60% recurring, you start to run the business.

**Decision 5: Cost-to-deliver.** Your actual contribution margin per customer. Most operators are guessing. We'll measure it.

**Decision 6: Price increase cadence.** When you raise prices, by how much, and how you communicate it. Operators who don't have a cadence raise prices once every 3-5 years in a panic. Operators with a cadence raise quietly every 12 months.

**Pricing Model: Which One Fits You**

Five common pricing models for operator businesses:

**Hourly.** Highest variance. Worst for operations. Worst for client trust. The only time hourly works is when the work is genuinely unpredictable and the client knows it. Avoid where possible.

**Project-based.** Better. Fixed scope, fixed price. Margin depends on scope discipline. If scope creeps, margin disappears. Project work needs a documented scope or it becomes hourly in disguise.

**Retainer.** Best for service operators. Predictable. Margin compounds because you get more efficient at the same scope over time. Retainer works when there's ongoing work, not one-off projects bolted into a retainer wrapper.

**Subscription.** Best for product or SaaS-adjacent businesses. Different pricing logic, you're selling access, not labor. Subscription requires churn measurement (Module 2.6).

**Performance.** Hardest to execute. Hardest to enforce. Highest upside. Only works when you can credibly measure the outcome and isolate your contribution. Most operators who promise performance pricing actually deliver retainer pricing with extra steps.

**Hybrid.** Common: a retainer base plus a project layer plus a performance kicker. Hybrids work when you have clean accounting. They fail when you don't.

For most operator businesses, the right answer is retainer-led with a project layer for non-recurring work.

**Packaging: The Three-Tier Structure**

The single most important packaging decision is the number of options.

**One option:** decision speed is fast but you leave money on the table. Buyers can't pay you more even if they want to.

**Three options:** the buyer self-selects up. Decision speed stays fast. Average order value rises 20-40% versus one option.

**Five or more options:** decision speed collapses. Buyers freeze. Don't.

Use three.

The three tiers should be structured around scope and outcome, not around hours.

- **Tier 1 (Entry):** the smallest scope that produces a result. Designed for buyers who need proof before they go bigger.
- **Tier 2 (Recommended):** the right scope for your top profile from Module 2.2. This is where 60-70% of buyers should land.
- **Tier 3 (Premium):** a larger scope with materially more deliverable. Priced at 2x to 3x Tier 2. This is the anchor.

The mistake operators make: Tier 3 is too close in price to Tier 2. The anchor effect disappears. Tier 3 should feel like a different tier, not a slightly bigger Tier 2.

**The True Cost-to-Deliver Audit**

This is the highest-value 45 minutes in the module.

Most operators price based on "what the market will bear." They don't actually know what each customer costs to serve. They guess at margin. They run out of money for operations and don't know why.

The audit:

1. Pick your top 3 customers by revenue.
2. For each, list every cost incurred to serve them, direct labor (yours and team), software, sub-contractors, materials, fulfillment, travel, and a fair allocation of overhead.
3. Calculate revenue per customer minus those costs.
4. Divide by hours actually spent. That's your true effective hourly rate.

Most operators discover that their "premium" tier is operating at 18-22% contribution margin while their "starter" tier is at 60-70%. The pricing has inverted because the premium tier became scope-creep central.

The audit fixes this. Cap the scope. Or raise the price. Or move that customer out.

**The Recurring Revenue Math**

A business that's 30% recurring has 30 cents of every dollar pre-committed. The other 70 cents must be sold every month.

A business that's 70% recurring has 70 cents pre-committed. The other 30 is sold incrementally.

The math difference shows up in three places:

1. **Operator stress.** Selling 30 cents a month is sustainable. Selling 70 cents a month is the reason operators can't sleep.

2. **Hiring capacity.** Recurring revenue is bankable. You can hire against it. Project revenue is not bankable, you can't promise a salary against a deal you haven't closed yet.

3. **Valuation.** At exit, recurring revenue is valued at 3-5x annual. Project revenue is valued at 0.5-1.5x annual. A business with $1.2M in revenue can be worth $4M or $700K depending on the recurring percentage.

Target ratio: at least 50% recurring within 12 months. 65%+ within 24 months.

**The Price Increase Protocol**

Most operators are afraid to raise prices because they remember the one customer who left the last time they tried. They don't remember the 19 who didn't.

The protocol:

1. **Cadence:** every 12 months, on a fixed date. Same date every year. Predictable for you, predictable for the customer.

2. **Amount:** 6-12% for existing customers. 15-25% for new customers. The gap creates a "lock-in" effect, existing customers know they're getting a deal.

3. **Communication:** 60 days notice in writing. Direct. Brief. Reason given.

4. **The script (in your workbook):**

> Our prices will increase by [X]% on [date]. You'll continue to receive [list of value markers]. If you have any questions, just reply to this email.

5. **Expected churn:** 3-5% of customers leave on a price increase if you've been delivering value. If more than 8% leave, the value side has been weak, that's a delivery problem, not a price problem.

**What To Do Right Now**

Three things:

1. **Open the workbook.** Complete Section A (cost-to-deliver audit) on your top 3 customers. 45 minutes well spent.

2. **Build the 3-tier package structure** using the canvas. Tier 1 entry, Tier 2 recommended, Tier 3 anchor. Make Tier 3 feel like a different tier.

3. **Schedule the next price increase.** Pick a fixed date 8-12 weeks from today. Write it in your calendar. Write the communication email now. You're not announcing yet, you're scheduling.

The Revenue Architecture Plan is one page. When you've made all six decisions, lock it. Take the quiz.

I'll see you in Module 2.4, Advanced Lead Generation Systems, where we turn this offer architecture into a multi-channel acquisition engine that doesn't depend on you.
