{"course":{"slug":"ai-for-small-business","title":"AI for a Small Business","url":"https://addaly.com/learn/ai-for-small-business","level":"beginner","track":"work"},"lesson":{"slug":"pricing-conversations","title":"Price: the one thing that never comes out of the model","url":"https://addaly.com/learn/ai-for-small-business/pricing-conversations","position":47,"of":88,"minutes":9,"answer":"A model has no access to your costs, your market or your need for the work, so any price it produces is a plausible shape rather than a figure: use it for the spreadsheet formula.","keyIdea":"A model has no access to your costs, your market or your need for the work, so any price it produces is a plausible shape rather than a figure: use it for the spreadsheet formula, the tier structure and the increase letter, and never for the number itself."},"body":{"format":"markdown","text":"## Why not\n\nA price is a claim about four things the model has no access to: what the work costs you, what your market will bear, how badly you need the work this month, and what this particular customer is like to deal with.\n\nAsk for a price and you get a plausible number, produced by the same mechanism that produced the invented delivery time in module one. It has the shape of a price. It is not connected to your business by anything.\n\nThere is a second, subtler problem. A number offered to you at the start of your thinking becomes an anchor, and you will adjust from it rather than working out the answer. Owners who ask a model what to charge routinely end up within 10% of the first figure it produced, whatever their costs turn out to be.\n\nSo the rule is absolute, and it is the same rule as everywhere else in this course, applied to the most expensive case: the facts go in, the words come out.\n\n## Where the number comes from\n\nA spreadsheet, with your own figures.\n\n**Costing.** Materials, labour at a real hourly rate including the hours you do not bill, overheads apportioned, a margin. Write it as a formula so changing one input updates everything. Free in LibreOffice Calc or Google Sheets.\n\n**Ask for the formula, not the answer.** This is the good use. *I make wooden chairs. Build me a spreadsheet formula that takes material cost, hours, hourly rate, overhead percentage and target margin, and returns a price. Explain each cell.* You get a structure, you supply the numbers, and the arithmetic is done by something that can add.\n\n**Then check one by hand.** The formula is a piece of generated text like any other and it can contain a mistake in exactly one place. One worked example checked on paper is enough to trust the column.\n\n## What it is good for\n\n**Structuring options.** Turning one price into three tiers, and describing what is in each. Presenting a middle option changes what people choose, and constructing the tiers is language work.\n\n**Writing the increase letter.** The hardest routine writing task in a small business. Short, unapologetic, states the new price and the date, gives one honest reason, does not over-explain. Draft it, then cut the last two sentences: there will be two too many.\n\n**Rehearsing the conversation.** *Play a customer who thinks this quote is too high. Push back three times, realistically.* Then practise answering. Useful preparation, and it costs nothing to do badly the first time.\n\n**Explaining your price in writing.** Not justifying it. Setting out what is included and what is not, so the number sits in a context rather than arriving alone.\n\n## Competitor prices\n\nDo not ask a model what competitors charge. It will tell you, fluently, from nothing. With search switched on it may find a real published price, which is better, and it may equally find one from two years ago on a page nobody updated.\n\nDo it properly: look at their published prices yourself, ask as a customer, or check the trade association figures. Then use the model to organise what you found, which is a task it can actually do.\n\n## The line to hold\n\nEvery quote, every price, every discount decided by you. Every time, including when you are busy, including on the two-hundredth one.\n\nThis is the single most consequential rule in the course, because it is the one where a silent error costs money directly rather than through a chain of consequences. A wrong adjective is embarrassing. A wrong price is either a loss you have committed to or a customer who has been quoted something you cannot honour, and both of those are conversations you have to have in person.\n\n## Discounts, and why they should be rare and rule-bound\n\nThe moment you allow a discount to be negotiated case by case, every conversation becomes a negotiation and your prices become suggestions.\n\nWrite the rules down instead: what triggers a discount, how much, who may authorise it. Two or three lines. Then put them on the internal facts sheet, and keep them off the customer-facing one: the split from module two, applied where it matters most.\n\nA drafting assistant with the customer sheet then cannot offer a discount, because it does not know one exists. That is the containment doing its job rather than a restriction you have to remember to enforce.\n\n## When a customer says it is too expensive\n\nTwo responses work and one does not.\n\nAsk what they are comparing it with, which usually reveals they are comparing something different. Or restate what is included and let the number stand.\n\nWhat does not work is immediately reducing the price, and it is exactly what a helpful drafting assistant will propose. It teaches the customer that your first number is not real, and it prices the next job for you."},"check":{"question":"An owner asks a model to help price a new service, then builds a costing spreadsheet and finds the calculated figure is 9% below the model's suggestion. She rounds up to match. What has probably happened?","options":[{"text":"The model's suggestion was informed by industry norms it encountered in training, so the closeness of the two figures is mild corroboration of the costing.","correct":false,"tempting":"Treats a generated number as evidence about her market, when nothing connects it to her costs and the agreement of the two figures has an easier explanation."},{"text":"The costing spreadsheet has probably omitted an overhead, which is why it produced a lower figure than a general estimate would.","correct":false,"tempting":"Assumes the model is right and the spreadsheet wrong, reversing which of the two is actually grounded in the business's own numbers."},{"text":"The first figure anchored her, so she is adjusting toward it rather than pricing from her costs, which is why she asked for the number before doing the costing.","correct":true},{"text":"Rounding up by 9% is within the normal margin of judgement in pricing decisions, so the adjustment is unremarkable and does not indicate anything about how the figure was reached.","correct":false,"tempting":"Normalises the size of the change while ignoring its direction, which is consistently toward whatever number was seen first."}]},"prev":{"slug":"ads-without-burning-money","title":"Automated advertising on a small budget","url":"https://addaly.com/learn/ai-for-small-business/ads-without-burning-money"},"next":{"slug":"books-and-invoices","title":"Bookkeeping Without Handing Over Your Accounts","url":"https://addaly.com/learn/ai-for-small-business/books-and-invoices"},"authorship":"Founder and series editor: Dr Mustafa Mun. Written by AI models to a written standard. Exam keys checked blind by a second model: 3,665 of 3,666 agreed. Academic review invited.","review":{"status":"Draft, open for academic review"},"cite":"Addaly (2026) 'Price: the one thing that never comes out of the model', in AI for a Small Business. Edited by M. Mun. Addaly. Available at: https://addaly.com/learn/ai-for-small-business/pricing-conversations (Accessed: 13 October 2026).","licence":{"name":"CC BY-NC-SA 4.0","url":"https://creativecommons.org/licenses/by-nc-sa/4.0/"},"reader":{"schema":1,"title":"Price: the one thing that never comes out of the model","courseTitle":"AI for a Small Business","module":{"index":5,"slug":"selling-and-being-found","title":"Selling: listings, images, marketing and price"},"answer":null,"keyIdea":"A model has no access to your costs, your market or your need for the work, so any price it produces is a plausible shape rather than a figure: use it for the spreadsheet formula, the tier structure and the increase letter, and never for the number itself.","hero":{"kind":"plate","image":null,"alt":null,"caption":null},"blocks":[{"t":"h2","id":"why-not","runs":[{"text":"Why not"}]},{"t":"p","runs":[{"text":"A price is a claim about four things the model has no access to: what the work costs you, what your market will bear, how badly you need the work this month, and what this particular customer is like to deal with."}]},{"t":"p","runs":[{"text":"Ask for a price and you get a plausible number, produced by the same mechanism that produced the invented delivery time in module one. It has the shape of a price. It is not connected to your business by anything."}]},{"t":"p","runs":[{"text":"There is a second, subtler problem. A number offered to you at the start of your thinking becomes an anchor, and you will adjust from it rather than working out the answer. Owners who ask a model what to charge routinely end up within 10% of the first figure it produced, whatever their costs turn out to be."}]},{"t":"p","runs":[{"text":"So the rule is absolute, and it is the same rule as everywhere else in this course, applied to the most expensive case: the facts go in, the words come out."}]},{"t":"h2","id":"where-the-number-comes-from","runs":[{"text":"Where the number comes from"}]},{"t":"p","runs":[{"text":"A spreadsheet, with your own figures."}]},{"t":"p","runs":[{"text":"Costing.","b":true},{"text":" Materials, labour at a real hourly rate including the hours you do not bill, overheads apportioned, a margin. Write it as a formula so changing one input updates everything. Free in LibreOffice Calc or Google Sheets."}]},{"t":"p","runs":[{"text":"Ask for the formula, not the answer.","b":true},{"text":" This is the good use. "},{"text":"I make wooden chairs. Build me a spreadsheet formula that takes material cost, hours, hourly rate, overhead percentage and target margin, and returns a price. Explain each cell.","i":true},{"text":" You get a structure, you supply the numbers, and the arithmetic is done by something that can add."}]},{"t":"p","runs":[{"text":"Then check one by hand.","b":true},{"text":" The formula is a piece of generated text like any other and it can contain a mistake in exactly one place. One worked example checked on paper is enough to trust the column."}]},{"t":"h2","id":"what-it-is-good-for","runs":[{"text":"What it is good for"}]},{"t":"p","runs":[{"text":"Structuring options.","b":true},{"text":" Turning one price into three tiers, and describing what is in each. Presenting a middle option changes what people choose, and constructing the tiers is language work."}]},{"t":"p","runs":[{"text":"Writing the increase letter.","b":true},{"text":" The hardest routine writing task in a small business. Short, unapologetic, states the new price and the date, gives one honest reason, does not over-explain. Draft it, then cut the last two sentences: there will be two too many."}]},{"t":"p","runs":[{"text":"Rehearsing the conversation.","b":true},{"text":" "},{"text":"Play a customer who thinks this quote is too high. Push back three times, realistically.","i":true},{"text":" Then practise answering. Useful preparation, and it costs nothing to do badly the first time."}]},{"t":"p","runs":[{"text":"Explaining your price in writing.","b":true},{"text":" Not justifying it. Setting out what is included and what is not, so the number sits in a context rather than arriving alone."}]},{"t":"h2","id":"competitor-prices","runs":[{"text":"Competitor prices"}]},{"t":"p","runs":[{"text":"Do not ask a model what competitors charge. It will tell you, fluently, from nothing. With search switched on it may find a real published price, which is better, and it may equally find one from two years ago on a page nobody updated."}]},{"t":"p","runs":[{"text":"Do it properly: look at their published prices yourself, ask as a customer, or check the trade association figures. Then use the model to organise what you found, which is a task it can actually do."}]},{"t":"h2","id":"the-line-to-hold","runs":[{"text":"The line to hold"}]},{"t":"p","runs":[{"text":"Every quote, every price, every discount decided by you. Every time, including when you are busy, including on the two-hundredth one."}]},{"t":"p","runs":[{"text":"This is the single most consequential rule in the course, because it is the one where a silent error costs money directly rather than through a chain of consequences. A wrong adjective is embarrassing. A wrong price is either a loss you have committed to or a customer who has been quoted something you cannot honour, and both of those are conversations you have to have in person."}]},{"t":"h2","id":"discounts-and-why-they-should-be-rare-and-rule-bound","runs":[{"text":"Discounts, and why they should be rare and rule-bound"}]},{"t":"p","runs":[{"text":"The moment you allow a discount to be negotiated case by case, every conversation becomes a negotiation and your prices become suggestions."}]},{"t":"p","runs":[{"text":"Write the rules down instead: what triggers a discount, how much, who may authorise it. Two or three lines. Then put them on the internal facts sheet, and keep them off the customer-facing one: the split from module two, applied where it matters most."}]},{"t":"p","runs":[{"text":"A drafting assistant with the customer sheet then cannot offer a discount, because it does not know one exists. That is the containment doing its job rather than a restriction you have to remember to enforce."}]},{"t":"h2","id":"when-a-customer-says-it-is-too-expensive","runs":[{"text":"When a customer says it is too expensive"}]},{"t":"p","runs":[{"text":"Two responses work and one does not."}]},{"t":"p","runs":[{"text":"Ask what they are comparing it with, which usually reveals they are comparing something different. Or restate what is included and let the number stand."}]},{"t":"p","runs":[{"text":"What does not work is immediately reducing the price, and it is exactly what a helpful drafting assistant will propose. It teaches the customer that your first number is not real, and it prices the next job for you."}]}],"check":{"question":[{"text":"An owner asks a model to help price a new service, then builds a costing spreadsheet and finds the calculated figure is 9% below the model’s suggestion. She rounds up to match. 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