Building a Strong Pricing Strategy for Engineering Firms

Engineering firms fail because they bring 1980s habits into 2025. I see it everywhere in our industry, especially in water and wastewater. Talented firms. Smart engineers. Good reputations. But still running like someone's grandfather started them: • Charge by the hour.  • Keep PEs chained to CAD.  • Bill for every meeting and markup. And what does that system actually create? → Burned-out senior engineers doing drafting work.  → Talented designers stuck in production mode instead of design.  → Firms too rigid to scale or adapt. Then you realize: this is silly. We have better tools now. We have better ways to work. So what if firms stopped running like it's 1980? • Train AI on your templates so it handles first drafts, engineers keep the judgment, multiply the output.  • Protect deep work blocks so PEs can actually think, not just shuffle CAD layers and sit in status meetings.  • Price around outcomes, permits approved, construction costs saved, timelines protected, not hours logged. That's when everything changes. The firms that are winning right now? → They question old assumptions instead of defending them.  → They embrace AI as leverage, not as a threat.  → They let their best people do their best work, and charge for the value of that work, not the hours. Your clients don't care how you've "always done it." They expect speed, clarity, and results, not billable hours and timesheets.  Which costs you more: the hours your PEs spend in CAD, or the projects you turn down because you're maxed out? #OldSchoolEngineering #EngineeringFirms #CAD #PE  

Despite pricing being the most powerful business lever for growing Operating Profits, many mid-market companies still rely on static, cost-plus formulas to generate prices, missing key opportunities to drive higher profits on both ends (leaving money on the table and missed sales opportunities). Price optimization is built on advanced analytics, including AI and machine learning, to set prices that maximize profitability while aligning with broader business objectives (i.e., balance revenues with gross profit $). It leverages transactional and market data to deeply understand customer behavior and adapt to changing inputs (i.e., competitor prices, inventory levels, seasonality, etc.). Whether you’re in manufacturing, distribution, or retail, some form of an insights-driven, dynamic, and automated pricing strategy is essential for profitable growth. In the below article (see comments), we explore foundational pricing methodologies such as dynamic pricing, value-based pricing, and competitor-based pricing: 1. Dynamic Pricing: Adjust prices in real-time (or near real-time) based on competitor actions, inventory levels, market trends, and financial goals. Amazon’s dynamic model exemplifies how real-time adjustments can balance a low-price reputation with margin optimization. 2. Value-Based Pricing: Set prices on perceived customer value rather than costs or competitors. This ensures your pricing reflects the unique differential value you provide. A simple approach is assigning a competitive price index premium based on detailed customer research. 3. Competitor-Based Pricing: Position products strategically by considering competitors’ real-time prices. Techniques like premium pricing, price matching, and loss leader pricing help assign the right comp-pricing strategy to each customer or product segment. Successful price optimization requires avoiding pitfalls. Overcomplicating pricing models can lead to inefficiencies and erode trust among commercial teams—we’ve seen this too often. Relying on opaque “black-box” AI systems can also cause a loss of control and transparency. The key is balancing sophistication with simplicity, ensuring strategies are effective and embraced by the sales team. Building or insourcing your price optimization capabilities offers significant advantages. It aligns your pricing with business goals, provides greater decision control, and strengthens long-term pricing acumen. You can create a robust, customized pricing engine tailored to your unique needs by fostering collaboration across teams and continuously refining your models. Mid-market companies have a unique opportunity to elevate price optimization from a tertiary (or non-existent) concern to a core business function. Achieving this requires a deliberate, thoughtful approach that leverages advanced analytics, your internal/external data assets, and a collaborative approach with your Finance/Pricing and Commercial teams. #revenue_growth_analytics

If you’re like me, you’re probably the bottleneck in pricing engagements. Here’s how I fixed that in our firm: 1. Made a list of all of our services… every possible deliverable. This is a good exercise by itself because it helped me realize we were doing too much for too many. 2. Broke down individual steps for each service, including specific roles for each step (which doubled as an SOP for our workflow tool Karbon). 3. Set an hourly cost rate for each person involved and estimated time required for each step. 4. Researched market pricing for every service identified in step one. Set that as the target fee for each individual service. 5. Made sure we could hit our target profit margin based on the market value of the service, and the aggregate cost rate to provide the service. NOTE: under no circumstances should the fee from step four depend on the cost rate calculated in step three. I wanted the data just to make sure that the service was profitable. If it wasn’t, then we stopped providing it and opted instead to find a referral partner like Gusto. 6. Created a dynamic pricing tool that considered every relevant factor that I would normally consider when I was doing my “gut check” when pricing an engagement. 7. Once the pricing tool was substantially complete, put every service and standard fee into Ignition so the team could just point and click to create engagements. 8. Took it a step further and created proposal templates in Ignition to group a set of standardized services based on client profiles. It’s not perfect, and it needs to be updated from time to time, but the result is that for a standard service, anyone on my team can price it without me getting in the way.

I’ve seen founders spend 18 months perfecting features, but never spend 18 hours perfecting pricing. Result? They leave 30–60% ARPU on the table. Truth: Investors don’t just ask “What’s your MRR?” They ask “How much pricing power do you have?” If you can’t flex pricing and still win, you don’t have a moat. --- The Pricing Architecture Playbook (8 Weeks to Fix) Step 1: Build the 3×3 Grid → Packaging (Good / Better / Best) → Monetization (Per Seat / Usage / Value Metric) Most startups only pick 1 dimension. The winners combine 2. Example: per-seat and usage thresholds. Step 2: Map Willingness-to-Pay → Interview 20 customers. → Ask: “At what price is this too cheap? Too expensive? Fair?” → You’ll be shocked how much higher the “fair” number is. Step 3: Design Fences Create reasons to upgrade: → Seat limits → API caps → Feature gating (must-have, not nice-to-have) If customers can sit forever on your lowest tier, you’ve failed pricing. Step 4: Run 2 Price Tests (Weeks 5–6) A/B test new vs old plans with fresh leads. → Watch conversion + churn. → If conversion holds, lock new pricing. Step 5: Roll Out With Confidence (Weeks 7–8) Existing customers? Grandfather old pricing for goodwill. New customers? Pay the new rates, no apologies. --- Real Case Study → SaaS startup at $80 ARPU, flat for 9 months. → Rebuilt pricing with Good/Better/Best tiers + usage fences. → Tested $99, $149, $299 packages. Result (in 8 weeks): → ARPU jumped from $80 → $128 (+60%). → NDR went from 102% → 128%. → Next fundraise: valuation doubled - off the same product. --- If your pricing slide in the deck is one neat table with 2–3 plans, you’re probably undercharging. If you haven’t tested new pricing in the last 12 months, you’re definitely undercharging. And if you’re scared to raise prices? It means you don’t believe in your own product. --- The fastest way to add runway isn’t raising more money. It’s fixing your pricing power. --- Want brutal clarity on your startup? Skip years of wasted effort and stop making expensive mistakes. Get direct advice on your deck, fundraising, GTM, or founder challenges. Book a no-BS 1:1 call with me here: https://lnkd.in/gWV8DT56 💬 Drop your most burning pricing question in the comments. ♻ Repost to save another founder from starving while sitting on hidden ARPU. 🔔 Follow Anshuman Sinha for more Startup insights. #Startups #Entrepreneurship #VentureCapital #AngelInvesting #Innovation

A&E firms, Profit is absolutely achievable!! After working with over 1,600+ firms, I've seen 3 RELIABLE ways to increase profit: — There isn’t just one way to boost profit. Most firms have a few major profit levers. Sharing 3 big ones below. One of our customers used levers #2 and #3 to 3x revenue in 9 months. Check it out: ⬆️ Lever #1: The volume lever. Volume is about smart scaling – growing your capacity while maintaining quality. It's the fastest path to growth when demand exceeds your bandwidth. How to implement: → Double your project load & team simultaneously → Keep contract values stable as you scale → Focus on similar project types for efficiency Watch out for: Overhead costs climbing quickly. Make sure your operations and workflows can handle the growth before scaling. ⚡ Lever #2: The efficiency lever. I.e., delivering the same value in less time. Working smarter, not harder – and keeping the extra margin. How to implement: → Switch to fixed fees instead of hourly → Target 25% reduction in delivery time → Build expertise in specific building types Example of this one in action: One of our customers manages 60 monthly projects with just 13 staff. 💰 Lever #3: The pricing lever. This strategy is about matching your fees to your true worth. It's not about being the most expensive – it's about being worth more. How to implement: → Raise fees by 20% incrementally → Enhance service quality first → Communicate value effectively instead of justifying costs Example: If your average project fee is $100,000 at 20% margin, try to increase it to $120,000 over time. It can double your net profit if costs stay the same. // P.S. This is one of the biggest reasons why we built Monograph – to help firms implement these strategies systematically. Which approach resonates with your firm's goals?