Business is reasonably good. He opens early, works long hours, manages two employees and handles orders throughout the day.

His most popular chicken rice bowl sells for RM12.

He sells around 40 bowls a day.

At the end of the month, his sales look impressive. Yet, after paying his suppliers, staff, rent, utilities and other expenses, there is very little left.

Jason thinks he needs more customers.

But when he finally sits down to examine his numbers, he discovers something uncomfortable.

He doesn’t have a sales problem. He has a pricing problem.

Let’s look at five rules every business owner should understand.

Rule 1: If you don’t know your cost, you don’t have a price. You have a guess.

Jason calculates his chicken rice bowl cost based on chicken, rice and sauce.

He estimates that each bowl costs RM5 to prepare.

Since he sells it for RM12, he believes he makes RM7 per bowl.

Sounds good, doesn’t it?

But he has forgotten several other costs.

For illustration, let’s assume his monthly costs and sales are as follows:

Monthly sales assumptions

• 40 bowls per day
• 26 operating days
• RM12 selling price
• Total monthly sales: RM12,480

Monthly operating costs

Expense	Monthly cost
Chicken, rice, ingredients and packaging (RM5 × 1,040 bowls)	RM5,200
Rent	RM1,500
Staff wages	RM3,000
Employer EPF and SOCSO contributions	RM360
Utilities	RM500
Transport and miscellaneous costs	RM400
Total	RM10,960

That leaves RM1,520 before other applicable expenses, such as depreciation, financing costs and tax.

His apparent RM7 per bowl was never his actual profit.

And there is another important consideration: Jason’s own time.

If he works full-time in the business but doesn’t account for the value of his labour, he may be mistaking unpaid work for business profitability.

The lesson?

Your cost isn’t simply what you pay your supplier.

You need to understand direct costs, operating expenses, selling costs, wastage, platform commissions and the resources required to deliver your product or service.

You also need to understand which costs are fixed and which change with every additional sale.

Know your actual cost before deciding your selling price.

Rule 2: A customer who pays more isn’t necessarily better. A customer who costs you less to serve can be more profitable.

Imagine two customers buying the same product from Jason.

Customer A orders 100 bowls for an office event. The customer confirms the order early, pays on time and collects everything in one delivery.

Customer B orders 100 bowls over several separate occasions. Every order involves negotiation, special requests, repeated changes and additional delivery arrangements.

Both customers generate RM1,200 in sales.

But do they generate the same profit?

Not necessarily.

Customer B may require considerably more time, transport and administrative effort.

This is something many SME owners overlook.

They measure customers by how much they spend, but rarely measure how much it costs to serve them.

A large customer can be unprofitable if the business gives excessive discounts, absorbs delivery costs or spends too much time handling special requirements.

Likewise, a smaller customer who pays reliably and orders regularly may be much more valuable.

This doesn’t mean you should reject customers who negotiate.

It means you should understand the cost of serving them.

Don’t just measure customer revenue. Measure customer profitability.

Rule 3: Never compete on price alone. You will eventually run out of room.

Jason discovers that another shop nearby sells a similar chicken rice bowl for RM10.

He immediately considers reducing his price from RM12 to RM10.

He believes customers will come back.

But let’s examine the consequences.

Assume Jason’s total monthly costs remain RM10,960 and he continues selling 1,040 bowls.

Selling price	Monthly sales	Balance after listed costs
RM12	RM12,480	RM1,520
RM11	RM11,440	RM480
RM10	RM10,400	-RM560

These are simplified illustrations assuming the same sales volume and cost structure.

By reducing his price to RM10, Jason would turn his existing positive balance into a loss.

Could he sell more bowls at RM10? Possibly.

But how many additional bowls would he need to sell, and does he have the capacity to produce and deliver them?

A lower price only makes sense when the additional volume or strategic benefit justifies the reduction in margin.

There will always be someone cheaper.

Someone may have lower rent, better supplier arrangements, different operating costs or a completely different business model.

You cannot automatically copy their pricing and expect the same result.

Instead, compete through:

• Consistent product quality.
• Reliable service.
• Convenience and delivery.
• Customer experience.
• Trust and reputation.
• A product or service that solves a specific problem.

Price is one way to compete. It should not be your only reason for winning customers.

Rule 4: Increase your price when your value and costs justify it. Don’t wait until you’re desperate.

Many business owners are afraid to increase prices.

They worry customers will leave.

So they absorb every increase in supplier costs, packaging, transport and wages.

Eventually, their margins become too thin to support the business.

Consider a small bakery.

Its owner has improved the packaging, introduced better ingredients and invested in more consistent product quality.

The original cake sells for RM50.

After reviewing the new costs, the owner realises that maintaining the same price leaves very little margin.

Rather than waiting until the business struggles to pay its bills, the owner reviews the costing and increases the price to RM55.

The important part is being able to explain the change honestly.

Customers should understand what they are paying for.

However, increasing value doesn’t automatically guarantee that customers will accept a higher price. The market, competitors and customers’ willingness to pay still matter.

A business owner must consider all three.

Don’t increase prices blindly.

But don’t be afraid to review them either.

Pricing should be a business decision, not an emergency reaction.

Rule 5: If everyone accepts your price immediately, review whether you’re charging enough.

This rule needs a little explanation.

Imagine a consultant offering a service for RM500.

Every prospect accepts immediately.

At first, the consultant feels happy.

But after reviewing competitors, customer feedback, the amount of work involved and the value delivered, the consultant discovers that similar services are commonly priced higher.

Perhaps RM500 is appropriate.

Perhaps the service should cost RM650.

The point isn’t that every customer must complain about your price.

Nor should you deliberately make your product expensive just to test customers.

The point is that pricing requires regular evaluation.

Ask yourself:

• Are customers accepting the price because it reflects the value?
• Are we charging enough to cover the resources required?
• Are our margins sustainable?
• Could we offer different packages for different customer needs?
• Are we leaving money on the table because we’re afraid to charge appropriately?

A healthy pricing strategy doesn’t mean being the cheapest or the most expensive.

It means finding a price that customers are willing to pay and that allows your business to operate profitably.

You don’t need every customer. You need the right customers at the right price.

A simple exercise for every business owner

You don’t need complicated software to start reviewing your prices.

Choose ONE product or service.

Then write down:

1. Your current selling price.
2. Direct costs per unit.
3. Your share of operating expenses.
4. Selling and delivery costs.
5. Any wastage, discounts or platform charges.
6. The time and resources needed to deliver it.

Then calculate your contribution margin:

Selling price − Variable costs = Contribution per unit

Your contribution helps cover fixed operating expenses. Once those are covered, the remaining amount contributes towards profit.

Remember that a markup and a profit margin are not the same thing.

For example:

• Cost: RM60
• Selling price: RM100
• Markup on cost: 66.7%
• Gross margin on selling price: 40%

Understanding this difference can change how you price your products.

And if you’re selling services, remember to include the time and expertise required to deliver the work.

Price Right. Profit Right.

You didn’t start a business just to stay busy.

You started it to create something sustainable, earn a living and build a better future.

But sales alone cannot tell you whether your business is healthy.

You need to understand your costs, margins, customer profitability and pricing strategy.

Sometimes, the answer isn’t to find more customers.

Sometimes, it’s to stop undercharging the customers you already have.

Today, choose ONE product or service. Review its costing. Check its margin. Ask yourself whether the price is working for your business.

At HacheBC, we believe every business deserves to understand its numbers before making its next big decision.

Need help reviewing your costing, margins and pricing?

Let’s talk.

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HacheBC — Minding Your Business Matters.

Note: The businesses, people and figures in this article are illustrative examples created for educational purposes. Actual costing and pricing decisions depend on each business’s circumstances.