How Can I Price My Small Business Products and Services?
The key to a successful business is knowing how to make a profit. Profit levels are directly affected by the investments you make into your products and services and the amount of money you recoup with sales. A complete accounting of the investments you make as well as a sophisticated understanding of the marketplace can help you decide on an initial price for your products and services. Experience will give you the tools to adjust your prices if necessary.
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Instructions
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Calculate your expenses. If you are selling a retail product, your expenses include the material and manufacturing costs to produce the product. If you hire employees and lease a retail location, you must also include building lease and labor costs. Take a moment to ensure you have accounted for all of your costs, including hidden costs, which may include transportation for sales trips, and days taken off any other employment to tend to your product line or promote your professional services.
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Research your competition. This includes knowing what your competitors charge for similar products and services. If your products are more expensive, be prepared to sell that to your customers with an appropriate inducement. For example, your product may be more expensive because you are local and use high quality materials. If your services are of an equivalent quality and you possess similar qualifications to your competitors, you must offer something different to charge a higher price, or you could offer a discount. Take your neighborhood into account, especially in a retail environment. Price differences can be significant depending on local competition.
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Calculate a price range that covers your cost per product item or service and is competitive with the price range in the marketplace. Try to calculate a significant profit margin to allow you to promote sale prices in the future or if your expenses increase. Use typical pricing techniques that provide an inducement for consumer purchase. For example, more people may buy a product at $99.00 than at $101.00, or $19.99 than $21.99 because the consumer instinctively feels the product is a better deal.
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Keep track of your expenses and sales as your business progresses. Adjust prices if necessary, either by reducing by a few dollars to increase the volume of your sales, or increasing slightly to maintain or increase your profit margin without deterring customers.
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