The Price Is Right: Understanding Pricing Models vs. Business Models
Most founders ask this question at some point:
“What should I charge for my product?”
It sounds simple, but here’s the truth:
If you’re asking that question in isolation, you’re already thinking too small.
In this episode of Zero to Traction, Cameron Law and I (JDM) dive deep into why pricing models and business models are not the same thing—and why confusing the two can stall your startup’s growth.
Pricing Model ≠ Business Model
Your pricing model is how you charge. Your business model is the full system of how value is created, delivered, and captured.
Most pitch decks mash these together on one slide, but that’s misleading. When investors ask about your business model, they don’t want to hear “$10/month.” That’s not a business model. That’s a price point.
Here’s the framework we use—the Magic Triangle of business model design:
Who: Who is your customer?
What: What value are you creating for them?
How: How do you create and deliver that value?
Why: Why does this make money (and scale)?
Your pricing model touches the “why,” but it’s not the whole picture. It’s one piece of a bigger system.
Why This Gets Complicated (and Why That’s Okay)
When founders think about pricing, they often start with costs or competitor benchmarks. But without clarity on:
Who you’re charging
What they value most
How you deliver it
…your price point is a guess—and likely wrong.
As Cameron pointed out in the episode, the real question isn’t “What should I charge?” It’s:
“Who am I targeting, what problem am I solving, and how does this turn into a profitable, scalable business?”
Patterns Make It Easier
Here’s the good news:
Even though the concept feels overwhelming, most businesses reuse a handful of proven business model patterns.
In fact, 90% of major innovations over the last 200 years didn’t invent new business models. They remixed existing ones.
Examples You Already Know
Razor & Blades
Sell a product at cost (or a loss) and profit on consumables. Think Gillette razors → replacement blades.
Modern versions? Inkjet printers & cartridges. Apple’s iPod & iTunes. Video game consoles & games.Pay-Per-Use
Instead of a flat subscription, customers pay only when they use the service. Example: Amazon Web Services.Freemium
Offer a free base product to acquire users, then monetize through premium features. Think Spotify, Dropbox.Two-Sided Market
Google’s search engine is free for users, but advertisers pay for access to your attention.Aikido Model
Do the opposite of your competitors. Nintendo Wii is the classic example—while Xbox and PlayStation chased hyper-realistic graphics, Nintendo targeted families with simple, social games and motion controls.
There are 55 such patterns. Most businesses combine two or three. If you’re building a startup, you should know this list.
Why Patterns Matter for Founders
Patterns don’t just help you brainstorm pricing—they help you ask better questions:
What value do we create for each stakeholder?
Where does recurring revenue show up?
Can we layer multiple patterns for resilience?
They also give you language investors understand. Saying “We’re using a Razor & Blades model with a Freemium acquisition layer” sounds a lot better than “We think people will pay $10/month.”
Takeaways for Founders
Stop thinking price-first. Start with customer and value.
Know the 55 patterns. Use them to generate hypotheses and refine your business model.
Communicate clearly. Tie your model to proven concepts investors already understand.
Because at the end of the day, it’s not just about the price being right. It’s about the model being sustainable, scalable, and compelling.
About Josh David Miller
Over the past decade, Josh David Miller has empowered over 100 startup founders and innovators to launch and scale their ventures. As the driving force behind the Traction Lab Venture Accelerator,
Josh specializes in guiding early-stage startups through the intricate journey from ideation to product-market fit. His expertise lies in transforming innovative concepts into viable, market-ready solutions, ensuring entrepreneurs navigate the challenges of the startup ecosystem with confidence and strategic insight.
About Cameron R. Law
Cameron R. Law is a Sacramento native dedicated to building community, growing ecosystems, and empowering entrepreneurs.
As the Executive Director of the Carlsen Center for Innovation & Entrepreneurship at California State University, Sacramento, he leverages his passion for the region to foster innovation and support emerging ventures. Through his leadership, Cameron plays a pivotal role in shaping Sacramento's entrepreneurial landscape, ensuring that innovators and builders have the resources and support they need to succeed.
