Your first price is a guess.

In middle school, some friends and I ran a candy business out of pencil boxes. We'd buy the big packs of candy and gum, break them up, and sell the pieces to other kids for a quarter each.

Our prices on the everyday stuff were the best around, and that's what brought people to us. The margin on a piece of regular gum was thin, about 25 percent, and that was fine. Its job was getting kids to stop by. The gum was my loss leader.

Then there were the special items. I'd go looking for things nobody at school had seen. I asked my parents to take me to the international market and came back with candy, gum and treats from Japan or China. Sometimes I brought homemade things. Those I priced very differently. A special item might sell for five dollars and have cost me fifty cents.

Nobody knew what anything cost me. Because my prices on the regular items were so good, kids assumed the price on the special one made sense too. They had no way to check. So they paid based on how valuable it was to them, and how good it tasted.

Eventually it turned into a ring. Other kids sold under me, so anyone could come to me, or to someone selling for me, for cheap gum, or for something special if they wanted it.

Two lessons stuck. The first was how a loss leader works in real life: the cheap thing is there to bring people to you. The second was bigger. Price on the value you provide. Once you do, you start looking for ways to provide better value, because that's where the money is. And your pricing gets flexible. You're no longer stuck thinking "I can only do this on a markup." Margins can move, which means you can do more.

Most founders price their first product the way I priced gum, and never get around to the imported candy.

The first price is a guess

Founders treat their first price like it's carved in stone. It goes on the website, gets defended on every sales call, and stays put for years, because changing it feels like admitting a mistake.

But the first price was always a guess. Usually it's a markup on cost, or a number borrowed from a competitor, dressed up as a decision. The real question is whether you learn anything from it.

Why the first guess is usually low

Fear, mostly. The first sales are frightening, and a low price feels like it lowers the chance of hearing no. It does, a little. It also lowers what each yes is worth, and it draws in the buyers who care most about price and least about what you built.

Then there's the cheapest competitor. Founders scan the market, find the lowest price, and come in just under it. Now the cheapest competitor is setting your price, and that competitor may be losing money, selling a weaker product, or both.

And there's charging for effort. "It only took us a few weeks to build, so we can't charge much." That's gum thinking. Customers pay for what the product does for them: hours saved, revenue made, risk taken off the table. Your weeks never come into it. The kids buying imported candy cared how it tasted, and never once asked what I paid for it.

Run it as an experiment

An experiment needs a few things a guess doesn't have.

One variable at a time. Change the price, the packaging, the free trial and the pitch in the same month and you won't know which one moved anything. Change the number and hold everything else still, or change the packaging and keep the number.

A clear question. "Is our price right?" isn't something an experiment can answer. "Will teams of ten to fifty sign a yearly contract at this price without asking for a discount?" is. Write it down before you start.

A date to decide. An experiment without an end date quietly becomes the new normal. Pick a number of deals or a number of weeks, and on that date choose: keep it, raise it, lower it, or ask a better question.

And decide in advance what result would change your mind. If you raise the price and the win rate holds, you keep it. If it drops sharply, you go back, or you change the packaging. Writing that down first protects you from the most common habit in pricing, which is reading every result as proof of whatever you already believed.

New customers are the easiest place to test. Existing customers already know your price, and changing it on them is a different conversation. ("Nobody reads the menu board" picks that one up.)

What walking away looks like in software

Across a pencil box, walking away is easy to spot: the kid picks up the five-dollar candy and puts it back. Software buyers almost never say "too expensive." They walk away quietly, and you have to learn to read it.

Silence right after the number is the most common version: a good first call, a proposal with the price in it, then nothing. A long procurement stall is another. Sometimes that's just process, and often it means someone looked at the number and the case wasn't strong enough to move it up the pile.

Endless discount requests tell you something too. If nearly every buyer asks for a discount and you nearly always give one, your real price is the discounted one, and every buyer who talks to another buyer will figure that out.

The opposite signal counts. If nobody pushes back at all and deals close fast without negotiation, you're probably selling imported candy at gum prices.

When to stop experimenting

At some point the price has to hold. Once a few experiments give you the same answer, commit. Constant changes confuse buyers, teach your sales team to wait for the next discount, and turn every renewal into a negotiation. Experiment until you know. Then come back to the number on a schedule, once or twice a year, instead of every time a deal stalls.