Business Model & Pricing
How your company makes money, and how to think about what to charge.
What is this?
Your business model is the answer to "how does this become a company that makes more money than it spends?" Pricing is one part of that: what you charge, whom you charge, and how often.
Common models include one-time purchases, subscriptions, usage-based pricing, commissions/marketplace fees, and advertising — each with very different implications for how you grow.
Why it matters
A great product with no credible way to make money isn't a company yet. Investors want to see that you understand the mechanics of your own economics — not that you have the "correct" price on day one.
Step by step
- 1Decide who pays: is it the end user, a business, or a third party (like an advertiser)?
- 2Pick a pricing model that matches how customers get value (per use, per month, per outcome, per transaction).
- 3Estimate a rough price using comparable products, not a number that just feels right.
- 4Estimate your gross margin — what's left after the direct cost of serving a customer — even roughly.
- 5Plan to test and adjust pricing with real customers rather than treating your first number as permanent.
What good looks like
You can explain your business model in one breath, and you know roughly what's left over after it costs you to serve one more customer.
Common mistakes
- Pricing based only on your own costs, without reference to the value delivered.
- Being afraid to charge anything, which also removes your best signal of real demand.
- Copying a competitor's price without knowing your own margin.
- Never revisiting your pricing after initial assumptions turn out wrong.
Checklist
- You can state who pays and how often in one sentence.
- You have a rough estimate of your gross margin.
- Your price is grounded in comparable products or in customer conversations, not a guess.
- You have a plan to test pricing with real customers.