Why do I price the way I do?

A question worth asking out loud

Most pricing questions founders bring to Collective 54 are about what to charge. This one is about why the current price exists at all, and the published material treats it as the right place to start. The pricing role essay in the newer book says that for decades pricing was treated as a decision: a founder chose an hourly rate, experimented with project fees, introduced retainers when predictability mattered. It says that approach worked not because it was optimal but because the economics of professional services made pricing forgiving. Labor was the primary input, marginal cost was roughly linear, and as long as utilization stayed high, most pricing models produced acceptable outcomes.

As an inference, that is why so many founders cannot explain their own pricing. It was never designed. It was adopted, adjusted and defended, and it survived because the economics underneath were stable.

Cause one: you inherited it

The pricing strategy essay says many founders remain anchored to outdated pricing models inherited from 1990s playbooks. They price as though the market still values time instead of outcomes, and they discount to win deals while premium-positioned peers command price power. Its diagnosis is that they stay in these models not out of conviction but out of habit, uncertainty or overwhelm.

The same essay maps where inherited models sit. In its Stage and Era Compass, hourly billing at commodity rates is where a young, people-delivered firm starts, and it says that model makes sense early, when the offer is still being discovered and the founder sells and delivers most of it. The problem is staying there: efficiency reduces revenue, clients push back on rates and the work becomes hard to differentiate.

Cause two: you price from the inside or from the side

The pricing chapter of the 2020 book lists why most boutiques price incorrectly. They do not know what their services are worth to clients or what clients will pay. They cannot explain the logic of their price or quantify the value a client receives. The approach is inward out, based on internal costs. They rely too heavily on what competitors charge. And their sellers cannot handle price objections.

As an inference, those reasons fall into two habits. Pricing from the inside builds the number from cost and adds a margin, which tells you nothing about what the work is worth. Pricing from the side copies the market, which the market rate answer on this site says marks a firm as a commodity and imports downward pressure. Both are ways of setting a price without knowing the value, which is the gap the value-based pricing answer is about.

Cause three: your price is the sum of its exceptions

The pricing role essay describes what happens as firms grow while pricing is still treated as episodic, revisited occasionally, debated emotionally and enforced inconsistently. Firms end up with dozens of pricing exceptions, custom packages that no longer align with delivery, discounting that goes untracked, inconsistent value signaling, and margin leakage no one can fully explain. Its point is careful: none of this happened because founders made poor decisions. It happened because decisions were being asked to govern a system.

As an inference, in many firms the honest answer to the question is that there is no single price. There is a list price, and then a history of individual deals that each made sense at the time.

Cause four: changing it feels dangerous

The pricing strategy essay is sympathetic about this. Changing pricing feels like pulling a thread that might unravel everything: positioning, packaging, sales motions, delivery, staff roles, client expectations and even the identity of the firm. No founder wants to destabilize what works in pursuit of what might, so they stand still. Its answer is that standing still is now the riskiest move of all, and that a founder does not need a full transformation, only a single pricing move aligned with the next step.

Why the answer matters more now

The pricing role essay explains why leaving these causes alone is getting riskier. AI makes marginal cost non-linear and decouples value from time spent. Under those conditions it says hourly pricing becomes indefensible, project pricing becomes arbitrary, and retainers become misaligned with delivered value. Efficiency without pricing governance leaks: gains are passed to clients unintentionally, eroded through discounting, absorbed by scope expansion or masked by packaging confusion. As an inference, a founder who cannot say why the firm prices the way it does will not see that leak until margins compress.

Find your own answer

As an inference from the material, a short audit will tell you which causes apply. Take the last ten engagements and write down, for each, how the price was actually set: from hours and rates, from cost plus a margin, from what a competitor charged, from the budget the client named, or from the value to the client in hard dollars. Then compare the quoted price with what was realized, and list every discount and exception. Finally, answer the ten pricing questions in the 2020 book; it says that if eight or more come back no, pricing is an issue.

Match the fix to the cause

If the model is inherited, the pricing strategy essay says to locate your cell on the Stage and Era Compass and move one cell, up or to the right, not both. The pricing strategy answer on this site covers that.

If the price is set from cost or from competitors, the work is learning what the engagement is worth to the client, which the value-based pricing answer covers.

If the price is the sum of its exceptions, the pricing role essay calls for governance. People keep value definition, positioning, pricing philosophy, boundary decisions and intentional exceptions. A system takes price integrity, discount visibility, exception tracking, packaging consistency and margin monitoring, so that pricing stops depending on founder vigilance.

If fear is what holds it in place, the pricing strategy essay offers a small first step: interview five clients about the outcomes that matter most, re-scope and re-price one offer, and track revenue per client, margin, sales cycle and retention for ninety days.

What we do not prescribe

Collective 54 publishes no pricing audit template, no target price and no single correct pricing model for every firm. The published positions are pricing that once worked because economics were forgiving, the seven reasons boutiques price incorrectly, models inherited and held by habit, uncertainty or overwhelm, pricing drift from exceptions and discounting, the Stage and Era Compass and one-cell moves, the division of pricing work between people and a governed system, and the warning that AI makes legacy pricing structurally insufficient.

When this answer flips

If the firm is young and still finding its offer, the essay says hourly pricing makes sense for now; the question becomes when to move, not whether the current model is wrong.

If pricing is set by a procurement process you cannot change, as an inference, the lever is packaging and scope inside that frame rather than the rate.

And if eight or more of the ten pricing questions come back yes and the audit shows little leakage, the 2020 book says pricing is not your problem; keep doing what you are doing.

The short answer

Usually because of one or more of four causes the published material identifies. You inherited a model, often from 1990s playbooks, and kept it out of habit, uncertainty or overwhelm. You set the number from your own costs or from competitors, and, as the 2020 book says, most boutiques do not know what their work is worth to the client. Your price has drifted into the sum of its exceptions and untracked discounts, because decisions were asked to govern a system. Or changing it feels like pulling a thread that might unravel the firm. Audit the last ten engagements to see which cause applies, then match the fix: move one cell on the Stage and Era Compass, learn the value to the client, govern pricing as a system, or re-price one offer and measure it for ninety days.