# Pricing *Price to the strategy, not the spreadsheet.* --- You sell aerospace components. Actuators, hydraulic seals, cable assemblies. Small enough to hold in one hand, precision-engineered, each one certified to fly on aircraft worth hundreds of millions of pounds. A single seal costs a few pounds to manufacture and can ground that aircraft if it fails. You're in the annual pricing review. Your finance team thinks you're leaving money on the table. Your sales team thinks you'll lose deals if prices go up. Both have data. --- Many of your parts are sole-source. FAA certification is part-number specific, and qualifying an alternative takes years of testing and millions in engineering costs. Once a part is designed into an aircraft, every replacement for the next thirty years flows through you. The customer has no realistic option. That justifies a premium. If the cost of a part failing is grounding a £200m aircraft, and there's nowhere else to go, the price should reflect what it's worth to the customer, not what it costs you to make. A cable assembly that costs $1,737 to manufacture sells for $7,863. The operational discipline that supports this is straightforward. You invest in maintaining sole-source positions: keeping certification current, protecting proprietary specifications, ensuring nobody else can qualify an alternative. You price every product to the value it delivers, not the cost of making it. And you keep the organisation focused. Three value drivers: get the price up, get the cost down, generate new business. Everything else is noise. EBITDA margins run above 50%, roughly double the industry average. That's [[TransDigm]]. The original equity has returned over 1,000x in three decades. --- But captive customers know they're captive. They track what you charge against what it costs to make, and a cable assembly marked up 4.5x breeds resentment that compounds as quietly as the revenue does. So maybe the play is to be the alternative. You build the engineering capability to certify parts that do the same job as the OEM originals, then price them 30-50% below. The customer gets a part that meets the same safety standards for substantially less. Your safety record has to be impeccable, tens of millions of parts shipped, zero in-flight shutdowns, zero service bulletins, because without that record nobody switches. To make those margins work at a lower price point, you need low overhead. Small headquarters, autonomous business units, 2-3% corporate cost. You keep the people who built each business running it, because they know their markets and customers better than any central team. You don't integrate, don't standardise, don't try to add value from the centre. The discipline is staying out of the way. That culture becomes self-reinforcing. People stay for decades. When times get hard, you share the sacrifice rather than cutting the workforce. The reputation builds, and the next founder who wants a good home for their business picks up the phone before running a process. That's [[Heico]]. A hundred thousand dollars invested when the Mendelsons took control is worth over a hundred million. --- Same industry, same customers, same types of parts. Opposite pricing, both compounding for decades. TransDigm can't cut prices without undermining the regulatory moat it spent decades building. Heico can't raise prices without destroying the value proposition that earns its reputation. The pricing is the load-bearing wall of each system. Change it and the structure above collapses. Your finance team and your sales team will both have the data to prove their case. The question underneath is which system you're building. ---