Codie Sanchez's Case That Small Businesses Underprice by 30% or More

Jeni Britton charged $2 a scoop in Columbus in 1996, the same price as every ice cream shop around her, while paying herself $600 a month. Her ingredients cost four times what competitors paid for theirs. By 2000 she was ready to shut it down. Two years later, she doubled the price at a reopened stall, and Jeni's Splendid Ice Creams grew into what Codie Sanchez describes as a $100 million-a-year business.

Sanchez tells that story on a recent episode of her BigDeal podcast to illustrate what she calls the "fear tax": the gap between what a business should charge and what its owner is too nervous to. The episode, How To Ask For More Money (And Actually Get It), doubles as a promo for her book Own or Be Owned, and it packs in a fair amount of doctrine. I wanted to walk through the argument, because it's the kind of advice Main Street hears constantly and rarely applies, and because parts of it deserve more scrutiny than a podcast gives them.

The Core Claim: You're Priced Too Low, Not Too High

Sanchez says her research across "thousands of small businesses" found most priced 30% to 300% below where they should be. She cites a McKinsey analysis claiming 80 to 90% of pricing mistakes come from prices set too low. She also leans on a Harvard Business Review finding that a 1% price improvement lifts operating profit by 11% on average, even with volume flat.

That HBR figure is the strongest thing in the episode. It's an old and well-documented result: price flows almost entirely to profit in a way cost cuts and volume gains don't. The McKinsey claim is trickier. I can't verify the exact study from the episode's description, and Sanchez's own "thousands of businesses" research is her own book marketing, not a published dataset. The directional argument holds up against what I see on Main Street, but treat the specific numbers as her numbers.

Her diagnostic is the close rate. If you win 80% of the deals you quote, you're too cheap; a healthy band is roughly 30 to 45%. Same with capacity: a restaurant booked past 90% with a line out the door is, in her framing, mispriced. Raise 20% and, in her words, "watch how nothing changes." This is the part of the episode I'd hand to any service business owner, because it's testable this week and costs nothing to try.

The Seven Sins, Compressed

Sanchez's taxonomy: imitation (pricing within 10% of competitors), delusion (treating "market rate" as gospel), surrender (discounting 30% or more), hustle poverty (fully booked and still broke), hero complex (only you can close deals), doormat work (customization at standard prices), and self-extraction (a price too low to ever pay someone else to deliver).

The last one is the sleeper. "Could your current price pay somebody else to deliver the work and still leave you cash on the side?" she asks. If no, delegation is mathematically impossible, and the business dies when you rest. I've watched plenty of owners love their work right into a permanent job they can't leave. Pricing is the lever that makes a business ownable rather than merely survivable.

The Bed Bath & Beyond story backs the discounting sin. Early on, the chain ran no sales at all, doing $130 million across 38 stores. Then came the blue 20% coupon, mailed at a peak of nearly a billion a year, until the coupon became the only reason anyone shopped there. Sanchez acknowledges the company made other mistakes, late e-commerce among them, but her point stands: heavy discounting trains customers to buy the discount, and if a customer only says yes at 30% off, that's your real price.

The Value-Split Formula

The constructive alternative is value-based pricing. Estimate what your work makes or saves a client annually, then charge 10% to 30% of that figure: 10% if you're unsure of your delivery, 20% if confident, 30% if you're excellent. The client keeps 70 to 90% of the upside.

Sanchez's case study is Charlie, a media employee running a $5,000 coaching program for job hunters, an audience with no money. Redirected toward authors who could pay, he offered book proposal work at a $40,000 flat fee and, per Sanchez, signed more than $400,000 in clients within weeks. The product didn't change. The buyer and the price did.

Here's where I'd pump the brakes. Value-based pricing works cleanly when you can measure the value, an agency plugging a leaking funnel, a consultant who saves measurable hours. It gets murky for the plumber, the baker, the landscaper, the majority of Main Street businesses selling things with no obvious six-figure ROI. Jeni's didn't price by value split; she priced against her own cost of goods and her quality gap. Both stories in the same episode point to two different methods, and the episode doesn't fully reconcile them.

There's also a risk the episode skips: value-based pricing invites value-based negotiation. If you claim your work creates $500,000, the client now has an incentive to argue it creates $80,000. Sanchez's answer is the comparison anchor, "compared to what?" and a rewritten pitch that leads with the cost of inaction. That works in a pitch meeting with a business owner. It works less well when the person across the counter is a homeowner with a budget.

The Repricing Framework

The five steps: set a floor at double your current price and a ceiling at full value created; gut-check margins against a 4:1 ratio (a dollar of revenue for acquisition, a dollar for delivery, two for you); book ten conversations with your best clients and their referrals; ask three questions about where they want to be in twelve months, the gap, and its cost, then send a one-page proposal with a premium option and a floor option; and send it fast, because momentum dies.

The 4:1 ratio is ambitious. Sanchez notes most businesses run 3:1:1 or worse, and that's the honest picture. If your margins can't support a salesperson, you can't scale past yourself, and that's the connection between pricing and everything else in the business. But doubling prices overnight is a bet on your customer base's elasticity, and the episode mostly shows winners. She doesn't dwell on the Jeni's customer who walked, or the Charlie prospect who didn't call back. Five of Charlie's nine calls said no. That's the real batting average, and it's fine, but owners should walk in expecting the no's.

What I'd Take and What I'd Question

Take the diagnostics. A close rate above 60% is a fact you can check. So is capacity utilization. So is whether you could pay someone else to do your job and keep profit. Those three questions will surface more pricing truth than any webinar.

Question the universality. This advice is built for consultants, agencies, and coaches selling outcomes to clients who can afford them. A lunch counter competing on a $12 plate has thinner tools. For that owner, the useful insight is smaller: know your cost of goods, stop discounting reflexively, and never let total strangers, meaning your competitors, set the single most important number in your business.

Sanchez closes with a line worth borrowing: "Nobody will ever pay you a number you're too scared to say out loud." True, as far as it goes. The counterweight is that a number said out loud has to survive contact with a customer who has options. Confidence sets the price; delivery defends it. You need both, and only one of them is covered in chapter one.

By Dorothy "Dot" Williams, Small Business & Entrepreneurship Correspondent