Price for the work you actually do

A useful price must reflect the work actually delivered, including the revisions, support and concessions that the original quotation may omit.

An order is accepted at a price that looks reasonable. The team delivers it, the customer pays, and very little remains. Before blaming the market, inspect what the price was expected to cover. A figure borrowed from a competitor tells you almost nothing about your own delivery costs, quality promise or operating capacity.

A useful price calculation starts with the work the sale creates. It separates costs that move with each sale from costs the business must carry for the period. It also keeps margin and markup distinct. Those words are often used as though they mean the same thing, but their denominators are different.

Count the costs caused by the sale

For a product, consider acquisition or production, packaging, inbound logistics allocation, delivery absorbed by the business, payment charges and expected directly related costs. For a service, inspect the delivery time, external specialist work, travel and materials that the engagement requires. State what has been included rather than calling an incomplete figure total cost.

Fixed overhead still matters, but keep it visible as a separate layer. Rent and management salaries may not increase because one additional item is sold. The contribution from sales helps cover them. If every calculation mixes those costs differently, comparing products becomes difficult and the owner cannot see which assumption changed.

Use a named period and a clear unit. A monthly retainer, a single session and an entire project are not interchangeable. A service that appears profitable per hour can be weak per project if preparation, revisions and follow up were omitted from the hours.

Margin and markup answer different questions

Consider a fictional item costing ₦6,000 and selling for ₦10,000 before any additional selling costs. The difference is ₦4,000. Dividing that difference by the selling price gives a 40 per cent margin on that stated cost basis. Dividing it by the cost gives a markup of approximately 66.67 per cent.

Neither figure is automatically net profit. If payment fees, delivery, overhead or other costs are still missing, the business must account for them separately. A label that says profit while excluding significant costs can make a poor offer appear healthy.

Suppose a fee equals two per cent of the ₦10,000 selling price. That fee is ₦200, leaving ₦3,800 of contribution after the ₦6,000 cost. The contribution margin is now 38 per cent. This is an original arithmetic example, not an industry benchmark or a recommended target.

Work backwards from an explicit target

A target margin can help test a price, provided the assumptions are visible. With fixed amount variable costs of ₦6,000, a fee of two per cent of price and a target contribution margin of 40 per cent, divide ₦6,000 by 0.58. The resulting price is approximately ₦10,344.83 before any chosen commercial rounding.

The denominator represents the share of the selling price available to cover that ₦6,000 cost. If fees and the target margin together reach 100 per cent, the model cannot produce a finite positive price. That is an impossible assumption, not a calculator fault.

A mathematically sufficient price is only one part of the decision. Customers still need a reason to buy, the offer must fit its market and the business must be able to deliver the promised value. Test willingness to pay and alternatives rather than assuming a spreadsheet can settle demand.

Examine service leakage

Service businesses can lose contribution through small unpriced commitments. Extra meetings, repeated revisions, urgent turnaround and unclear approval responsibility consume capacity. A higher headline fee may not fix the problem if the scope remains open ended.

Write the expected outcome, included activities, responsibilities, review points and completion condition. Record what counts as an additional request and how it will be agreed. This is not an invitation to become difficult with customers. It is a way to make the promise understandable to both sides.

A price needs a defined promise behind it. Otherwise every new request quietly changes the calculation.

Review the offer after delivery

Compare estimated and actual time, direct costs and customer changes on a small sample of completed work. Look for a recurring gap. Perhaps delivery is inefficient. Perhaps the quoted scope is too vague. Perhaps the price is too low. Those are different problems, and each needs different action.

Do not copy a universal good margin from a website. Appropriate economics depend on the offer, risk, operating model and costs included. Use external explanations to understand the terms, then use your own records to inspect the decision.

Where does the unpriced work enter?

Trace a recently completed job through the people who touched it. Ask what the customer originally requested, what the quotation promised and what was eventually delivered. Record extra calls, revisions, special purchases and urgent arrangements. Do not assume that every extra activity should be charged separately. Some are part of good service. The immediate task is to know which activities are included deliberately and which became a commitment without a clear decision.

Compare the job with another that appeared similar at the quotation stage. Differences can reveal whether the offer is truly standard or contains several distinct service levels. If one customer supplies complete information while another needs extensive preparation, a single price may conceal different economics. That does not mean the second customer is wrong. It means the business needs a clearer way to describe, deliver and price the additional work so that both sides understand the arrangement.

What should a scope boundary explain?

A scope boundary should say what the agreed fee includes, what the customer must provide and what happens when the work changes. Write it in language the customer can understand. A long document full of defensive wording is not necessarily clearer than a short description with a practical example. The purpose is to avoid surprise and preserve a workable relationship. Confirm an additional commitment before completing it where the agreement requires that decision.

Give the team a route for recognising a change in scope. Staff should know when they can resolve a small issue as part of the service and when they need a commercial decision. Without that boundary, helpful people may promise substantial work that the business has never costed. A pricing policy that exists only in the founder's head cannot guide a colleague during a live customer conversation. Make the normal boundary and the escalation point accessible.

How do you test a revised offer?

Prepare a version that changes one meaningful feature, such as the number of revisions, the delivery schedule or the level of support. Explain the difference clearly and check the expected direct cost before presenting it. Observe what customers choose and the work each version creates. A lower entry price may attract demand but produce more support effort. A higher service level may be commercially sensible if the additional value and cost are both understood.

Review completed work after the test. Compare the quoted contribution with the realised contribution, then explain the difference. If delivery cost remains unpredictable, the next task may be improving the process or gathering better information before quoting. If customers value a feature that costs little to provide, the offer may have room for a more useful structure. Let the evidence shape the next version. The aim is a price and promise the business can honour repeatedly, rather than a clever number that works only on the quotation.

Choose one important offer today. List the work it creates, calculate the contribution on a stated cost basis and write the assumption most likely to be wrong. Verify that assumption before revising the whole price list.