Pricing for Profit: A Practical Playbook for Business Owners & CFOs

Pricing is the single most powerful lever for profitability; often beating cost-cutting and volume growth. At Froehling Anderson, our advisory teams help owners and CFOs build pricing models that protect margins, reflect value, and scale with the business.

• Small changes, big impact. A 1–2% improvement in realized price can drive a larger profit lift than a similar change in volume or cost.
• Common mistakes we see:
  • Underpricing to “win the deal,” which compounds into chronic margin erosion.
  • Overpricing without clear differentiation, causing lost opportunities and inconsistent close rates.
  • Ignoring value perception, focusing on inputs vs. outcomes customers truly care about.
  • Failing to adjust for inflation, wage pressure, freight, and vendor changes; your last price increase likely isn’t covering today’s reality.

Accurate cost accounting is the foundation of any pricing decision.

• Direct vs. indirect. Materials and labor (direct) are only part of the picture. Don’t forget production overhead, IT, facilities, and admin (indirect).
• Fixed vs. variable. Understand which costs scale with units (variable) vs. remain steady (fixed).
• Hidden margin leaks: freight and fuel surcharges, returns and rework, customer service time, expediting, inventory write-offs, credit card fees, and sales discounts.

How a CPA helps: Our team of experts map your cost structure, allocate overhead appropriately, and separate fixed/variable elements so your pricing model reflects actual unit economics rather than wishful thinking.

Cost-plus (cost × markup) is simple and sometimes necessary, especially for commoditized items with transparent market benchmarks. But it often leaves money on the table when your offering delivers outcomes customers value far above input costs.

Value-based pricing aligns your price with customer willingness to pay and the economic outcomes you help create (speed, risk reduction, quality, compliance, uptime, or executive time saved).

• Where value-based shines:
  • Professional services (advisory, compliance + strategy bundles)
  • Complex manufacturing/engineering with tolerance, lead-time, or QA advantages
  • Software/tech-enabled services with clear ROI (automation, analytics, reduced error rates)

Our team frequently blends models: value-based fees anchored by ROI, plus structured add-ons for scope changes. Each of these is clear, fair, and margin protective.

1. Set-and-forget pricing. Revisit quarterly (or sooner in volatile markets).
2. Ignoring competitors and substitutes. Price lives in a market context, so track peer moves, promotions, and total cost of ownership comparisons.
3. Leaving finance out. Pricing requires CFO + sales alignment, so quotes reflect both strategy and math.
4. Missing costs. If your model excludes indirect, freight, or post-sale support, your margins will disappoint no matter how strong sales look.

1) Break-Even Analysis

• Formula: Break-even units = Fixed Costs ÷ (Price − Variable Cost per Unit)
• Use it to sanity-check new SKUs, promotions, or bundled services.

2) Contribution Margin Tracking

• CM per unit = Price − Variable Cost
• CM % = (Price − Variable Cost) ÷ Price
• Track by product line, client segment, and channel to find the real profit drivers.

3) Scenario Planning & Sensitivity Analysis

• Test “what if” cases: +3% price, −2% volume; or switch to 30-day terms from 45; or add a 2% logistics surcharge.
• Build guardrails (e.g., minimum margin floors) that sales can’t override without approval.

4) Financial Dashboards & KPIs

• KPIs we like: Realized price vs. list, discount rate by rep, CM%, mix variance, win rate at each price tier, average days to pay, freight as % of sales.
• Dashboards keep teams honest and enable quick, monthly adjustments.

5) Margin & Promotion Calculators

• Standardize the math for quotes and promotions so every rep runs the same numbers and protects the same floors.

How a CPA helps: Our team builds pricing and margin models that incorporate real costs, sales behavior, and capacity constraints so you can see profit impacts before changing price. We model profitability under multiple scenarios.

• Transfer pricing for related-party transactions, especially if you have multi-state or cross-border operations.
• Bundled services and revenue recognition nuances that affect timing and tax positions.
• Sales tax and sourcing rules (services vs. tangible goods, digital products) that can alter all-in pricing by jurisdiction.

• Choose pricing architectures (tiered, subscription, usage-based, retainer + variable, or outcome-based).
• Design value messaging that supports higher price realization.
• Implement governance (deal review thresholds, approval matrices, quarterly price audits).

Our approach isn’t one-size-fits-all. We tailor models for manufacturers, professional services, and closely held companies across Minnesota and beyond; and stay connected to your actual cost and customer data.

• Institute a margin floor and require approval for discounts beyond a set threshold.
• Review “freight & fees.” Add transparent surcharges or adjust list prices where pass-through costs have spiked.
• Bundle for value. Package compliance + advisory or product + support tiers to shift focus from hours/inputs to outcomes.
• Index pricing to cost drivers. Use contracts that allow periodic updates tied to published indices (materials, fuel, CPI).
• Clean up underpriced legacy clients. Phase-in increases with clear ROI messaging and improved service levels.

1. How often should we adjust pricing?
   At least quarterly in today’s environment, with interim updates when input costs or competitive pressures shift.
2. Is value-based pricing realistic outside professional services?
   Yes, especially for differentiated manufacturers where lead time, quality, uptime, or risk reduction creates measurable customer value.
3. What data do we need to start?
   Income statements for a period of three to five years, freight and returns data, historical pricing/discounts, and capacity constraints. We can start with what you have and improve as we go.

Ready to pressure-test your pricing and lift margins without losing your edge? Schedule a Pricing for Profit free consultation with Froehling Anderson today.

Our Minneapolis and St. Cloud, Minnesota based team will build a tailored model, align it with your strategy, and equip your sales leaders to price with confidence.

Disclaimer: The information provided here is accurate at the time of publication but may change as laws and regulations evolve. While Froehling Anderson aims to share accurate, timely information, we encourage you to reach out to your relationship manager for guidance on your specific situation.