Price: the one thing that never comes out of the model

Why not

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.

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.

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.

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.

Where the number comes from

A spreadsheet, with your own figures.

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.

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.

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.

What it is good for

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.

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.

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.

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.

Competitor prices

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.

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.

The line to hold

Every quote, every price, every discount decided by you. Every time, including when you are busy, including on the two-hundredth one.

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.

Discounts, and why they should be rare and rule-bound

The moment you allow a discount to be negotiated case by case, every conversation becomes a negotiation and your prices become suggestions.

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.

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.

When a customer says it is too expensive

Two responses work and one does not.

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.

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.