New businesses tend to price off gut feel or a competitor's number. A more grounded approach starts with your actual costs and your customer's actual alternative.

First-year pricing decisions tend to get made one of two ways: copying a competitor's number, or picking a figure that feels right without much math behind it. Both can work by accident, but neither gives you a way to know whether you're underpricing until the damage is already done.

Start with the floor

Your cost-based floor is the minimum you can charge and still cover your direct costs plus a reasonable share of overhead — rent, wages, software, everything that keeps the business running whether or not this specific sale happens. This isn't your target price; it's the number below which you're losing money on every sale, and it's worth calculating explicitly rather than estimating.

Then look at the alternative

Above that floor, the more useful question isn't "what do competitors charge" but "what does the customer's realistic alternative cost them" — whether that's a competitor, doing it themselves, or not solving the problem at all. A price that's justified relative to that alternative tends to hold up better than one set purely off a competitor's list price, especially if your offering isn't identical to theirs.

Build in room to adjust

Whatever price you land on for launch, treat it as a starting hypothesis rather than a permanent decision. Watch how customers actually respond — how often you hear price objections, how quickly people say yes — and be willing to adjust within the first few months rather than treating the initial number as fixed once it's live.