Most businesses set prices once and rarely revisit them. They look at what competitors charge, add a margin that “feels right,” and move on. The result? Products and services priced in the dark — with no real visibility into whether each one is actually profitable.
The Hidden Danger of Gut-Feel Pricing
The problem isn’t that your prices are too low. The problem is that you don’t know which prices are too low — and which are quietly eroding your margins while appearing profitable on paper.
Consider this: a business generating €5M in revenue might have 20% of its products or clients generating 120% of its profit, while the remaining 80% destroys value. This is the Whale Curve effect — and incorrect pricing is one of its main drivers.
The real question is not “what should we charge?” but “do we know what it actually costs to serve this client, product, or channel — and are we pricing above that?”
5 Signs Your Pricing May Be Destroying Value
Here are the warning signs that your pricing model is working against you:
- You use the same margin across all products or services. A blanket 30% markup ignores the fact that some products consume far more resources, support time, or logistics cost than others.
- Your most “popular” clients are also your least profitable. High-volume clients often demand discounts, customisations, and priority support — all of which have real costs that erode their apparent profitability.
- You can’t answer “which product has the best net margin?” without guessing. If your answer involves gross margin only, you’re missing the full picture of indirect costs, overhead allocation, and activity costs.
- You haven’t updated your cost structure in over 12 months. Inflation, supply chain changes, and new processes all affect true cost — but prices often stay frozen.
- Your accountant gives you profitability by product line, not by individual product, client, or order. Aggregated data hides the destroyers.
What It Takes to Price With Confidence
Pricing with confidence requires two things: knowing your real cost to serve and having visibility into profitability at a granular level — by product, client, channel, or geography.
This is exactly what Time-Driven Activity-Based Costing (TDABC) enables. Instead of spreading overhead across revenue, TDABC assigns costs based on the actual time and resources consumed by each activity. The result is a profitability model where every price can be tested against reality.
A Simple Self-Diagnostic
Ask yourself these three questions:
- Do I know the net margin (after all indirect costs) of my top 10 products or clients?
- Have I identified which 20% of my portfolio is likely destroying value?
- Do I have a model that lets me simulate the impact of a 5% price change on net profitability?
If you answered “no” to any of these, your pricing is probably working on incomplete information — and your business is carrying hidden losses you haven’t yet quantified.
The businesses that compete on margin — not just on volume — are the ones that understand their cost structure deeply enough to price deliberately.
Where to Start
You don’t need a full TDABC implementation to start. A targeted profitability audit focused on your top 20 products or clients can reveal where pricing is misaligned with cost. Most of our clients find at least 3–5 significant pricing anomalies in the first 4 weeks of a structured analysis.
If you’re curious where your business stands today, our free Profitability Profit Check gives you a structured view across 12 dimensions — including Pricing & Margins — in under 5 minutes.