Most B2B service businesses are underpriced. Not by 10% — by 30 to 70%.
The reason isn't competitive pressure. It's that founders price by looking inward (their costs, their hours) instead of outward (the customer's value, the alternatives the customer is comparing). Here's the framework we use to fix this.
Step 1: identify the customer's "next best alternative"
Forget your costs for a moment. What would your customer do if you didn't exist?
For a marketing consultancy, the alternatives might be:
- Hire a full-time CMO (~PKR 600k/month + 2 month notice + recruiting fees)
- Hire a junior in-house team (~PKR 300k/month + management overhead)
- Use an offshore agency (~PKR 200k/month + integration friction)
- Do nothing (cost: lost growth)
Your price must be less than the most expensive alternative, but more than the cheapest. If you're priced below the cheapest alternative, you're either a hidden bargain or you've trained your prospects to think you're low quality.
Step 2: identify the value drivers
For a B2B service, value comes from one of four places:
- Revenue increase — direct sales lift attributable to your work.
- Cost reduction — operating costs that disappear because of your work.
- Risk reduction — losses avoided (compliance, security, hiring mistakes).
- Time saved — hours of senior leadership time you free up.
For each engagement, write down the specific value driver in numbers. "We help you grow" doesn't price. "We typically deliver 2x pipeline coverage within 90 days, which represents PKR 8 million in annualised revenue" prices itself.
Step 3: capture 10–25% of the value
The rule of thumb across mature B2B services: charge between 10% and 25% of the annualised value you create.
Below 10%, you're undercapturing — you'll feel resentful within six months. Above 25%, you're at the price ceiling — closing slows down dramatically.
If you create PKR 8M of annualised value, your price should land somewhere between PKR 800k and PKR 2M.
The variance within that band depends on:
- How easy the value is to prove in numbers (easier to prove = closer to 25%).
- How urgent the customer's need is (more urgent = higher).
- Competitive density (less competition = higher).
Step 4: anchor with a high option
Always present three options when you propose price:
| Tier | What it includes | What it costs |
|---|---|---|
| Foundation | Core deliverable | Lower bound |
| Core | Foundation + recurring elements | Middle |
| Comprehensive | Core + premium / accelerated / risk-shared | Upper bound |
Two effects compound:
- The "comprehensive" tier shifts the customer's perception of normal price. They mentally compare core to comprehensive, not to free.
- Some customers actually pick comprehensive. The 20% that do pay for the discounting you do on foundation.
A founder who only quotes one number leaves money on the table from the customers who would have happily paid more for more.
What this means in practice
If you're a consultant or service business:
- Stop pricing by hours.
- Start pricing by value created, in numbers, per engagement.
- Always present three tiers.
- Move your minimum acceptable price up by 30% on your next proposal — and watch what happens.
In our experience helping clients reprice, the founders who do this reliably find that closing rates barely change. The customers who would close at the old price still close at the new one, because the old price was below their willingness-to-pay all along.
The math here is brutal, in a good way: a 30% price increase with no volume drop is roughly a 90-100% profit increase, because variable costs barely move.
That's not optimisation. That's correcting a long-standing mispricing.
