Founders Underprice Products

Jason Lemkin shares insights about founder psychology around pricing, particularly how founders typically underprice their products and the importance of proper pricing strategy for scaling businesses.

Key Points:

• Founder Psychology Around Pricing:

  • Most founders (80%) underprice their products
  • Stems from wanting to remove friction and close every deal in early days
  • Often rooted in imposter syndrome and uncertainty about product value

• How to Price Correctly:

  • Anchor around comparable products in the market
  • Look for products that feel similar in value and utilization
  • Price similarly or slightly lower (10-20%) than main competitors
  • Can charge 2x more if truly 10x better than competition

• Common Pricing Mistakes:

  • Claiming "there are no competitors" - try harder to find comparables
  • Pricing too low sends wrong market signal about product value
  • Customers will be confused and bounce if price is too cheap

• Role of Sales in Pricing:

  • Good sales people will get full value for product in ways founders rarely can
  • A strong VP of Sales can drive 30-100% revenue lift just through better pricing
  • Mediocre sales people will misunderstand product and see revenue decline

• Fixing Pricing:

  • Can adjust pricing later for new customers
  • Harder to change for grandfathered customers
  • Focus on removing friction from customer acquisition process before optimizing price

• Founder Priorities:

  • Remove friction from sales process daily
  • Make sign-up, support, and checkout easier
  • Only add friction (like "contact sales") after reaching tens of millions in revenue