In a small business, there is no pricing meeting where finance, sales, and engineering teams compare spreadsheets. Instead, the owner decides alone how much to charge for a product while juggling ten other decisions that day. A 2023 FIPECAFI master’s study conducted by Edson Clementino da Silva with 70 small business managers quantified this reality: in 82.86% of cases, the owner sets the price. Managers account for 12.86% of responses and analysts for 2.86%.
That figure alone comes as no surprise to anyone who works with small businesses in Brazil. What changes the picture is looking at who these owners are. The same sample shows that their educational backgrounds span 19 different fields—including business administration, law, engineering, medicine, dentistry, literature, and physical education. Only 5.71% have a degree in accounting, the field that covers pricing in the greatest depth. The outcome is predictable: the company’s most critical financial decision is left to someone who, in most cases, has never received formal training in how to make it.
A Centralized Decision, Dispersed Knowledge
Having one person make all pricing decisions is not a problem in itself—small businesses do not have the structure to assign this to a separate department, nor do they need to. The problem arises when that person lacks support: no spreadsheet, no method, and no regular reviews.
The same survey asked where the information used to set prices comes from. Most respondents, 68.57%, said they use a combination of costs, competitors’ prices, and customers’ perception of value. Only 5.71% said they rely solely on costs. This is better news than it may seem: Brazilian small business owners are already trying to combine different sources, which is exactly what pricing theory recommends. The bottleneck is not the intention—it is having the right tool to turn this mix of information into a reliable figure.
Why experience alone isn't enough
A reasonable assumption would be that while formal training may be lacking, there is no shortage of experience. In the sample surveyed, 44.29% of managers have more than 21 years of professional experience, and over half have more than ten. If experience alone could make up for the lack of a structured approach, hands-on practice would have already solved the problem.
It isn't. The experiment compared the accuracy of the prices set by managers in three scenarios:
- Scenario 1 — only the product price and market price were available;
- Scenario 2 — Scenario 1 plus fixed and variable costs and expenses;
- Scenario 3 — Scenario 2 plus a calculation and simulation spreadsheet.
The technically correct price in the exercise was R$263.29. Scenario 3 was the only one that came close, with an average of R$266.22 and a standard deviation of R$3.93—the tightest distribution of the three. Seeing the cost alone did not improve the accuracy of the answer. What made the difference was having a calculation tool.
Even more revealing: no characteristic of the manager or the company—education, years of experience, or industry—statistically explained who was more accurate in setting the price. All tests were above the significance threshold. It was not the person’s background that made the difference. It was the tool they had at their disposal.
The Risk of a Margin That Became a Habit
This finding ties into a broader concept in pricing literature: the difference between the formula used to calculate a price and the information that actually determines it. Nearly every company starts with cost plus margin—the formula is practically universal. What separates a sound application from a problematic one is the information embedded in that margin.
When the margin varies by product, customer, or market conditions, it acts as a bridge, bringing competition and perceived value into the same simple formula. When the margin is always the same for every product and every customer, it no longer carries information—it has become a habit. This is the clearest sign that pricing remains anchored to cost, even when the owner insists they “look at the market” when making decisions. This article on the difference between price makers and price takers helps explain the extent to which a variable margin is the company’s choice or something imposed by the market in which it competes.
An owner who makes pricing decisions alone and under time pressure is especially prone to this mistake: it is easier to reuse last month's margin than to recalculate each price based on what has changed with the product, the customer, and the competition.
An example of how a lack of method costs money
The most common mistake in this scenario is treating markup and margin as interchangeable—the calculation changes depending on which one you use. Markup is applied to cost: price equals cost multiplied by one plus the markup. Margin is based on the final price: price equals cost divided by one minus the margin.
A product that costs R$ 50 and has a 35% markup on cost sells for R$ 67.50. The same product, with a 35% margin on the selling price, sells for R$ 76.92—a difference of R$ 9.42 per unit. Across a month’s sales volume, that difference determines whether the business is actually earning the return its owner expects or selling for less than intended. Without a spreadsheet, regular reviews, and a clear understanding of which calculation is being used, it is easy to apply one while thinking it is the other—and only notice the impact on cash flow months later, without understanding where the difference came from.
What You Can Do Without Building a Pricing Department
No small business is going to create a pricing department with a dedicated analyst—and it does not need to. The research points to a more modest, practical approach: using some form of structured calculation tool, however simple, instead of relying on guesswork. The REVEMA selling price calculator is designed for exactly this purpose: enter the cost and the desired margin or markup, and it calculates the price and resulting margin so the owner can review them before applying the price.
The key is not to make the formula more sophisticated. It is to stop relying solely on memory and intuition for a decision made every month, for every product, where errors can quickly add up if no one checks the numbers. The study showed this clearly: what separated the group that set the right price from the group that got it wrong was not greater experience or education. It was having something other than their own judgment to support the calculation when making the decision.
