How to use this checklist
Work through the 8 items across Costs, Competition, and Value Perception. The Costs items are the foundation — knowing your total cost per unit (materials, labor, packaging, shipping) and allocating overhead (rent, utilities, software, insurance) lets you compute a real break-even point. Without that, any price is a guess. Be precise on overhead allocation: it has to be spread across the units you actually expect to sell.
What your result means
70%+ means you've grounded pricing in real costs, researched competitor pricing, and tested customer price sensitivity. 40-69% typically flags gaps in either cost accounting (overhead ignored or under-allocated) or customer research (price sensitivity untested). Below 40% usually means pricing was set without knowing true costs — the most common reason small businesses quietly lose money on every sale without realizing it.
When to trust it
This checklist evaluates the rigor of your pricing process, not whether your chosen price is optimal. A thoroughly-researched price can still miss the market if customer willingness to pay shifts, a competitor undercuts, or input costs spike. To stress-test your number, run a break-even calculation at your target price and model margin under a 10-20% sales drop. For products with complex cost structures, an accountant can verify your overhead allocation is sound.
Frequently Asked Questions
How do I know if my prices are too low?
The signals: you win almost every quote or bid (price is doing the selling), your margins shrink as you grow (more revenue, no more profit), and customers rarely push back or compare — resistance that never appears usually means you left room. Also check what substitutes cost: if you're meaningfully below comparable alternatives AND the cheapest thing about your business is you, raise prices on new customers first and watch what happens.
Should I compete on price or value?
Compete on price only if you have a genuine structural cost advantage — otherwise the low-price position is a bet that someone won't undercut you, and someone always will. Value competition (speed, quality, service, specialization) defends margins and fits small businesses far better. The workable middle: match market prices, then quantify the extras you include that competitors charge for. Rarely is 'cheapest' the right position for a small player.
When should I raise my prices?
When your costs have risen faster than your prices, when demand exceeds your capacity (queues are pricing information), or annually by default — small regular increases beat rare large ones that shock customers. Best practice: announce in advance, grandfather existing customers for a defined period where feasible, and tie the increase to something visible. The fear of losing customers is usually larger than the actual loss; test with your newest cohort first.