Key Takeaways
- Underpricing is almost always a confidence problem dressed up as a market research problem.
- Low prices attract low-value customers who require more support and generate more churn.
- Raising prices is much harder than setting them right the first time.
The most common pricing mistake in early-stage companies is not charging too much. It is charging too little, and the reasons are almost never what founders say they are.
Founders say they priced low because the market was price-sensitive, or because they wanted to grow fast, or because they were not sure the product was worth more. These are post-hoc rationalizations for a decision that was mostly driven by discomfort with asking for money. Saim Abbasi recognizes this pattern because he has made it himself.
What Underpricing Actually Attracts
Low prices do not just reduce revenue. They change the customer profile in ways that create operational problems. Customers who choose a product because it is cheap rather than because it solves a pressing problem are the customers who require the most support, complain the most when anything changes, and churn the fastest when a cheaper alternative appears.
The best customers, the ones who renew, expand, refer others, and provide useful feedback, almost always chose the product because it solved an urgent problem well. Price was not their primary criterion. When you underprice, you dilute the customer base with people for whom price was the primary criterion, and those customers are a drag on every metric you care about.
The Confidence Problem
Saim's observation after years of advising founders on pricing: the founder who is confident in their product's value has a much easier time holding a price than the founder who is uncertain. The uncertainty shows up in negotiations. When a customer pushes back on price, the uncertain founder discounts quickly. The confident founder explains the value and waits.
Customers can tell the difference. Discounting quickly signals that the price was not real, which raises a question about whether the product's claimed value was real either.
How to Price When You Do Not Know
The simplest pricing approach Saim recommends for early-stage companies without deep market data: name the price you think is right, double it, and see what happens in ten sales conversations. If fewer than half the conversations break down on price, your price is probably not too high. If all ten close without a single pushback, you are definitely too low. Price discovery through actual sales conversations beats any amount of market research for early-stage companies.
"Charging too little does not make you accessible. It makes you forgettable."