What another business’s price tells you, and what it does not

The comparison everybody makes first

Almost every new business sets its first price by looking at what other people charge and positioning itself slightly below. It is an understandable instinct: the market appears to have already worked out what the thing is worth, and undercutting looks like a way in.

The difficulty is that a price is the output of one particular business’s costs, capacity, reputation and intentions, and none of those are visible from a website. Copying the number without any of the machinery that produced it is how a business ends up working at a level it cannot sustain and cannot explain.

Two prices are rarely for the same thing

Before anything else, check what is actually included. Two quotes for a nominally identical job can differ in materials, in how much preparation is done, in who handles the parts nobody enjoys, in how quickly it happens, in what the buyer has to do themselves, and in what remedy exists if something is wrong.

Payment terms belong in that list too. A price payable in full up front is not the same price as one payable months later, and the difference is real money to whoever is waiting. Comparisons that ignore all this are comparing labels rather than offers, which is exactly what a buyer does when they have nothing else to go on.

Cost bases differ more than anybody admits

The business quoting less than you may have no premises, no vehicle and no insurance beyond the minimum. It may be run alongside another income, so it does not need to cover a whole living. It may be buying at volumes you cannot reach, or doing the same job for the twentieth time this month with a process refined accordingly.

It may equally be subsidised by savings, by a partner’s salary, or by simply not putting money aside for the obligations that will arrive later. From the outside, an efficient operation and one that has not yet noticed it is losing money look identical. That is the whole problem with the comparison.

Some prices in every market are not sustainable

In any trade there are always some businesses charging less than the work costs, and they are usually doing it unknowingly rather than as a strategy. They tend not to last, but they last long enough to set expectations among buyers, and while they exist they are genuinely difficult to compete with on price.

Chasing them is a losing move, because you would be matching a number produced by an error. The businesses that survive in markets with a lot of that behaviour do it by being clearly different rather than slightly cheaper — quicker, more reliable, better at the parts that go wrong, or simply still trading in three years when the client needs something fixed.

What the market price does tell you

It tells you what buyers are used to seeing, which is worth knowing even when you intend to charge more. A number far outside the familiar range needs an explanation attached, and providing that explanation is a legitimate and necessary piece of work rather than an apology.

It also tells you roughly where you sit. Being at the top of a range is a position with obligations: buyers who pay more expect more, and they notice. Being at the bottom is also a position, and the obligation there is efficiency, because it only works if you can genuinely deliver at that price. What does not work is being at the bottom by accident and hoping the arithmetic sorts itself out.

Use it to position, not to calculate

The sequence that works is to build the price from your own costs, your own capacity and what the work is worth to the buyer, and only then look at the market to see where the resulting number lands. If it sits far outside the range, that is a prompt to check your assumptions rather than an instruction to change the price.

Doing it the other way round — starting from somebody else’s number and working backwards to what you can afford — is how a business discovers in its second year that the price never covered anything. The market can tell you where you are standing. It cannot tell you what your own week costs.