Pricing and margins: who knows why a price is what it is?
Pricing decides what the company earns on every job: price lists, discounts, surcharges for special work, and price increases when costs move. In many SMEs the price logic is not in a system but in a person — often the owner or a senior salesperson — who knows which customers accept which prices, which jobs always cost more than they look, and where the margin floor really is. When that reasoning leaves, prices drift: too low on difficult work, too high where the market is sharp, and nobody can explain why.
The process in brief
- Cost price determined: materials, hours and overheads.
- Price structure set: price lists and segments.
- Job-specific pricing: complexity, risk and surcharges.
- Discounts and customer agreements.
- Exceptions approved.
- Prices reviewed and increased when costs move.
- Margins checked after the job.
Where the critical knowledge hides
| Step | Knowledge at risk | Who usually holds it |
|---|---|---|
| Cost price | The hidden costs specific jobs carry | Owner, controller |
| Price structure | Why the price lists are set up the way they are | Owner, sales lead |
| Job pricing | What makes a job more complex than it looks; risk surcharges | Estimator, owner |
| Discounts | Which customers get what, and why; agreements from years ago | Key salesperson, owner |
| Approval | Who may deviate from the price, and how far | Owner |
| Price increases | How and when to pass on cost changes, per customer | Owner, sales lead |
| Margin check | Which job types lose money, and the reasons | Owner, controller |
What breaks when that person leaves
Margins erode quietly. Similar customers end up with different prices, discounts continue long after their reason disappeared, and difficult work is priced like standard work because nobody knows what made it difficult.
Price increases get postponed, because nobody feels able to defend them. And in negotiations, a successor cannot explain why a price is what it is — so the price becomes whatever the customer proposes.
Early signs, long before anyone leaves:
- only one person may approve a discount — and they approve almost all;
- similar customers pay noticeably different prices, and nobody knows why;
- price increases are postponed year after year;
- post-calculations are made, but nobody acts on them.
What to capture first
- The price logic for non-standard jobs.
- Customer-specific agreements, and the reasons behind them.
- The approval rules for discounts and deviations.
- What post-calculations taught: which job types are underpriced, and why.
- How cost increases are passed on, and to whom first.
How MentX maps and captures this process
MentX captures how your company really works: the knowledge of your key people and the processes they run. We offer both a hands-on service approach — mapping your processes and capturing the knowledge behind them, from meetings, workshops and a guided intake — and our own personality-aware knowledge base, with full source attribution, in your own Knowledge Space. We build on the tools you already use and add best-practice solutions where they fit.
We map pricing end to end with the people involved, starting from a set of recent quotes and post-calculations, with the person who set the prices explaining each one. Then we capture your operations: the knowledge per step from the table above, with an owner, the decision rules and exceptions, and the source of each. With operational excellence, your team runs on that knowledge — clear hand-overs, tested instructions, and reviews when something changes. How an engagement runs.
In your sector
Family-owned industrials. Prices often carry decades of customer history that exists only in the owner's memory — valuable, and easily lost in a succession.
Professional services. Pricing is estimating effort: the knowledge of which assignments run over, and why, sits with the senior partners.
Machine builders. Options, customisation and service contracts make each price a composition — and the logic of that composition is rarely written down.
Common questions
Isn't pricing knowledge too sensitive to capture?
It is sensitive, which is why access matters. Captured knowledge stays in your company's own Knowledge Space, and you decide who sees what. See security.
Can a pricing tool replace this knowledge?
A tool applies rules consistently, which helps. The rules still have to come from somewhere — and for non-standard work, they come from the people who price it today.
How do we start when the owner does all the pricing?
Take recent quotes, won and lost, and ask the owner to explain each price. Capture the reasons with the date, then check them against the post-calculations.
Who should own pricing and margins?
In most SMEs the owner or the commercial lead. What matters is that one person decides on the price rules and their exceptions — and that the reasoning behind those decisions is captured, so it survives the next change of role.
