Why Hormozi Says Your Low Prices Are Killing Growth

Key Takeaways

• Winning in business requires a tradeoff between low prices and high-quality service levels.
• Underpricing often leads to a cash crunch that prevents hiring the help you need to scale.
• The Small Business Administration (SBA) defines small businesses by revenue or headcount, but pricing determines your actual survival.
• Raising prices by even 10% can double your net profit depending on your current overhead costs.

A husband-and-wife landscaping crew in Raleigh, North Carolina, recently hit a wall with six full-time employees and a fleet of three trucks. They were the cheapest high-quality option in town, but they couldn't afford to fix a broken mower without putting it on a personal credit card. They had the volume, but they lacked the margin to actually breathe.

This is the trap of wanting the reward of a big business without being willing to charge what that business actually costs to run. Entrepreneur Alex Hormozi recently highlighted this tension said on X that winning takes tradeoffs. He noted that many owners want the prize without the price. For a service business, that price is usually the discomfort of charging more than the guy down the street.

The High Cost of Being Cheap

When you start out, you probably think being the low-cost leader is a smart way to get your first five customers. It works for a while. But eventually, you realize that low prices attract the most demanding customers while leaving you zero room for error. If a job takes two hours longer than expected, you lose money. If a vendor raises their rates, you lose money.

According to the Small Business Administration, understanding your competitive advantage is vital, but being the cheapest is rarely a sustainable advantage for a small team. You don't have the massive scale of a Walmart to make pennies work. You need dollars. If you run a 4-person plumbing business, your overhead is fixed. You have insurance and payroll (plus fuel). When you undercharge, you're effectively subsidizing your customers' lives with your own stress.

Why Tradeoffs Are Mandatory

You cannot have the best staff, the fastest response times, and the lowest prices all at once. This is the math of business that many first-year owners try to ignore. If you want to hire a manager so you can finally take a vacation, that manager's salary has to come from the spread between your costs and your price. If that spread is too thin, you're stuck working on the tools forever.

Think of your pricing like a separate checking account just for your company's future.

Every time you quote a job, a portion of that money belongs to the business's growth, not just the labor and materials. Gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes) and equipment depreciation you now have to cover. The IRS (Internal Revenue Service) expects their cut regardless of whether you priced the job correctly.

Solving the Margin Crisis

Fixing this doesn't require a fancy degree. It starts with a simple audit of your last five jobs. Look at the total revenue and subtract every single cost, including a fair wage for your own time. Most solo owners realize they're actually making less than minimum wage after they account for administrative work and travel. This realization is the 'price' Hormozi mentions. It's painful to realize you've been doing it wrong, but that pain is necessary for change.

Start by raising prices on your next three quotes. You might lose one of them. That's actually the goal. If you win 100% of your bids, you're way too cheap. By losing the price-sensitive customers, you free up time to provide an incredible experience for the people who value your work. You're trading volume for sanity. (Disclosure: we may earn a commission if you sign up for tools through our links.

Building for the Long Haul

A business that doesn't make a profit is just a high-stress hobby.

' That's fine. Your job isn't to be affordable for everyone. Your job is to stay in business so you can continue serving your best customers and paying your employees fairly.

Winning requires you to choose your hard. It's hard to tell a prospect a high number. It's also hard to be broke and overworked on a Tuesday night. Pick the version of hard that actually leads to a prize worth having at the end of the year.

Audit your pricing today and add a 15% 'growth margin' to your next quote.

Related free tool

Break-Even Calculator — Find the number of customers you need to stop losing money. Free, no signup to start.

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📋 Disclaimer

This article is for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations change frequently, and the information presented may not reflect the most current legal developments. Always consult with a qualified professional (CPA, attorney, financial advisor) before making business decisions based on this content. MyBizNerd may receive compensation through affiliate links, but this never influences our recommendations.

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