How do I price my product so I'm actually making money and not accidentally selling below cost?
Most early founders price off gut or competitor screenshots and never compute their true unit economics, so they scale a loss. Start by knowing your fully loaded cost per unit or per customer (including payment fees, support, and your own time), then price for a margin that survives discounts and refunds. Pricing is a business-model decision, not a spreadsheet afterthought: if you can't explain how each sale makes money, you don't have a business yet, you have a hobby with invoices.
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✍️ Essay
✓ Link checkedFreeIntermediate
When you bolt a services layer onto a product business, the number investors actually stare at is your blended gross margin, and this is the canonical piece on why. Sacks (a serial founder and VC) walks through how low-margin, labor-heavy revenue drags down the whole business and why investors gross-margin-adjust their valuation multiples. It reframes the services question as a margin-discipline question, which is exactly the lens you need before you add the layer.
Investors read software and services as different-margin businesses, so mixing them lowers your blended gross margin even when each part is fine on its own.
Track product and services margins separately from day one, because a healthy blended number can hide a services drag underneath.
A lower gross margin is acceptable to investors only if there is a credible path to it improving as the mix shifts back toward the product.
When you are the only one selling something like your product, cost-plus and competitor benchmarks give you nothing to anchor on, and this book is the clearest case for the alternative: figure out what customers will actually pay before you finish building, then shape the product around that. Ramanujam ran pricing for hundreds of launches at Simon-Kucher, so the willingness-to-pay conversations he describes are practical, not theoretical. Treat it as a starting point for how to run those conversations, not a formula to copy.
From
Wiley (2016)by Madhavan Ramanujam and Georg TackeBook, ~240 pages
Have the willingness-to-pay conversation with customers early, before the product is done, so price shapes what you build instead of being an afterthought.
Different customers value your product differently: segment by willingness to pay rather than forcing one price on everyone.
Design the product and its packaging around the price customers will bear, not the other way around.
