Bad debt: deciding when to stop chasing and write it off
A bad debt is money you have decided not to collect. When to make that call, what the write-off actually involves, and why carrying it costs more than losing it.
A pricing strategy is a decision about what your price is based on. Most small companies never make it explicitly, which is why their prices drift towards cost plus a nervous margin.
A pricing strategy is the rule you use to arrive at a price: what the number is derived from, and what would make it change. Most small companies have prices without a strategy — they were set once by looking at a competitor, adjusted twice under pressure, and have not been examined since. That is not a disaster, but it means every pricing conversation starts from scratch and usually ends in a discount.
Choosing a method does not tell you the number. It tells you what evidence the number should respond to, which is what makes a price defensible in front of a customer and reviewable a year later.
Whichever method you choose, know your fully loaded cost first — including the founder's time, the software, and the share of overhead the work consumes. Not because cost should set the price, but because it sets the floor below which the work is charity. Companies that cannot state their cost per unit are usually the ones discovering, a year later, that their best-selling line loses money.
Two symptoms are worth watching. If you win nearly every deal quickly, you are almost certainly priced too low — a healthy loss rate on price is a sign you are testing the ceiling. If you lose on price constantly but customers who buy stay for years, the problem may be that you are selling to the wrong segment rather than that the price is high. And if every deal closes at a discount, the list price is fiction: either raise the discipline or lower the list and stop pretending.
In Ettex, the prices themselves live in Ettex Invoices — line items with quantities, rates, multiple tax rates and discounts, notes and terms fields, sequential auto-numbering with your own prefix, and a client book so the same rate reaches the same customer twice. The cost side comes from Ettex Books, where a chart of accounts and categorised entries let you work out what a unit actually costs. The comparison of options and the margin model belong in Ettex Sheets, the written rationale and the discount rule in Ettex Docs, and if you sell online, the published prices sit in Ettex Sites.
Plainly: Ettex has no pricing tooling. There is no price optimisation, no elasticity modelling, no competitor price tracking, no margin analytics and no approval workflow for discounts. It records what you charge and what things cost; the strategy is a decision you make and write down. That is the honest division — pricing is a judgement about customers, not a calculation software can run for you.
The rule determining what your price is based on — cost, competitors, customer value, market entry goals — and what evidence would change it.
Value-based where you can quantify the customer's benefit, competitive where buyers compare directly, cost-plus where neither applies. Most companies end up with a blend, which is fine if it is deliberate.
You win almost everything, and you win it quickly. A healthy proportion of losses on price is evidence you are testing the ceiling rather than sitting below it.
Cost determines the floor, not the price. Knowing it is essential; letting it set the number ignores everything the customer thinks the work is worth.
With a written rule: what triggers a discount, the maximum, and who approves. Ad hoc discounting turns the list price into fiction within a year.
Annually at minimum, against cost changes, win and loss rates and customer feedback. Test increases on new customers before applying them to existing ones.
A pricing strategy is a written answer to "what is this number based on". Know your floor, ask customers what the work was worth, choose a method deliberately, and set the discount rule before you need it.
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