How do you determine your pricing?

Nothing can cause confusion and doubt in your business like pricing your products and services. While you don’t want to charge less than you are worth, you also don’t want to price yourself out of the market. So how do you know if your price is right?

First and foremost you need to be financially informed. Before you set your pricing, work out the costs involved with running your business. These include your fixed costs (the expenses that will come in every month regardless of sales) and your direct costs (the expenses you incur by producing and delivering your products and services).

Know what your customers want from your products and services. Are they driven by the cheapest price or by the value they receive? What part does price play in their purchase decision?

Look at what you are selling, are your current customers buying high-end or low-end products and services? This information will help you determine if your price is right, what level of service or inclusions you should be offering and lastly if you are targeting the right market. It may be that you need to change your market to make your business more profitable.

Where do you want to be in the marketplace?
Do you want to be the most expensive, luxurious, high-end brand in your industry, the cheapest, or somewhere in the middle? Once you have decided, you will start to get an idea of your ideal pricing.

Look at your competitors. What are they charging? What inclusions and level of service are they offering for those prices? What customers are they attracting with their pricing? How are they positioned in the marketplace? The answers to these questions will give you an industry benchmark for your pricing.

One of the most important questions business owners neglect to ask themselves is, "How much profit do I want to make?" Don’t just look at what others charge and then pull a figure out of the air to be competitive without giving consideration to how much profit you want. Although you may be in business for the passion, and to add value to the lives of others, you also need to add value to your own and to the lives of others. So give careful consideration to what your time is worth.

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