7 Mistakes to Avoid When Setting Your Pricing

Pricing isn’t just a number—it’s a signal. It tells clients how much value you bring, sets the tone for negotiations, and shapes how your business is perceived. But many founders, consultants, and small business owners stumble when it comes to setting the right price. They either undervalue themselves, overestimate demand, or copy competitors without understanding the full picture.

If you get your pricing wrong, it can hurt your profit margins, confuse your clients, and slow your growth. The good news? Most pricing mistakes are preventable if you know what to look for.

This post walks you through 7 common mistakes to avoid when setting your pricing, and how to fix them before they damage your business.

Who This Is For / Why This List Matters

This guide is for:

• Consultants, service providers, and freelancers
• Startup founders setting prices for new products or services
• Legal professionals and business advisors supporting client pricing strategies
• Anyone building or updating their pricing model

Use this list when:

• You’re launching a new product or service
• You’re revising your offer or business model
• You’re unsure if your current pricing is working

1. Pricing Based on Time Instead of Value

Charging hourly can make sense in some industries—but it often traps you in a cycle of working more to earn more, without reflecting the value you bring.

Why it matters: If your work produces big results (e.g., a contract that saves a client millions), charging by the hour undervalues your impact.

What to do instead: Use value-based pricing. Look at the results you help clients achieve and set your fees accordingly. Package your services instead of selling time. Mistakes to avoid when setting your pricing include relying too heavily on time-based models.

2. Ignoring Your Costs and Profit Margins

Many service providers set prices based on what “feels fair” or what competitors charge—without doing the math.

Why it matters: If you don’t know your break-even point, you could end up working at a loss, especially if you offer discounts or free revisions.

What to do instead: Know your true costs (tools, taxes, time, delivery) and build a healthy profit margin into every offer. A good starting point is 20–40% margin for service-based businesses. Avoid mistakes to avoid when setting your pricing by factoring in all expenses.

3. Copying Competitors Without Context

Just because someone else is charging $1,000 doesn’t mean you should. Their brand, cost structure, and value proposition may be totally different from yours.

Why it matters: Blindly copying others can position you as too expensive (if you haven’t earned that trust yet) or too cheap (if your quality is better).

What to do instead: Research your market, but price based on your unique value, not just the average. Use competitor benchmarks as a reference, not a rulebook. Mistakes to avoid when setting your pricing include copying competitors without understanding your own unique value.

4. Making It Too Complicated

Some businesses offer 5–6 pricing tiers, add-ons, and upsells—all at once. While choice is good, too much complexity can confuse potential clients.

Why it matters: Clients who feel overwhelmed or unsure will hesitate—or worse, walk away.

What to do instead: Keep it simple. Stick to 2–3 clearly defined packages. Use language that highlights the difference in value (not just features). Mistakes to avoid when setting your pricing include overcomplicating your pricing model with too many choices.

5. Underpricing Out of Fear

It’s tempting to “start low” when you’re just beginning, or when sales are slow. But pricing too low can signal low quality or make it hard to raise prices later.

Why it matters: Low prices attract bargain-hunters, not loyal clients. They also make it harder to hire, scale, or invest in your business.

What to do instead: Price with confidence. Back it up with testimonials, clear value, and solid results. It’s okay to offer a discount occasionally—but don’t make low pricing your identity. Mistakes to avoid when setting your pricing include underpricing due to fear of rejection or slow sales.

6. Skipping Legal Terms Around Pricing

Pricing isn’t just a number—it’s a contract term. If you don’t clearly define your payment terms, refund policy, or scope, it could lead to disputes later.

Why it matters: Vague pricing terms can lead to late payments, scope creep, or chargebacks.

What to do instead: Always include pricing terms in writing: how much, when it’s due, what’s included, and how changes will be handled. Use a legal agreement or invoice that covers key terms like late fees, refund policies, and taxes. Mistakes to avoid when setting your pricing include skipping over essential legal clauses.

7. Forgetting to Adjust as You Grow

Your pricing should evolve as your business does. What worked for your first 10 clients may not work once you’re in higher demand or delivering more complex solutions.

Why it matters: Stagnant pricing keeps you stuck, even when your expertise has grown.

What to do instead: Review your pricing every 6–12 months. Look at client results, operational costs, and demand. Raise your rates gradually—or create new premium offers for more advanced buyers. Mistakes to avoid when setting your pricing include forgetting to adjust prices as your business scales.

🎯 Mini Case Example: When Simplicity Won the Sale

A legal consultant offered five different service tiers, thinking it would give clients flexibility. But most leads were confused. One client even said, “I don’t know what to choose—I’ll think about it and get back to you.”

After simplifying to just two options—a standard plan and a premium package—the consultant closed 30% more sales in the following quarter. Clients felt more confident and the buying decision was easier.

Lesson: Simplicity sells. When clients understand what they’re buying, they buy faster.

Quick Checklist: Mistakes to Avoid When Setting Your Pricing

• Don’t sell your time—sell your value
• Know your break-even and margins
• Don’t copy pricing without knowing why
• Avoid overwhelming clients with too many options
• Don’t price low just to get in the door
• Put payment and pricing terms in writing
• Review and adjust your pricing as you grow

Final Thoughts + Call to Action

Your pricing should support your business, not sabotage it. By avoiding these seven mistakes to avoid when setting your pricing, you’ll build a pricing model that reflects your value, supports growth, and protects your bottom line.

Want help reviewing your pricing strategy or drafting service packages that align with your contracts?
[Book a Strategy Call] or [Download our Pricing Review Template]