What's your Price?
Stepping into business and knowing your value can be one of the most difficult things to do. But once it’s done it can be the very thing that makes your life easier. Once you are comfortable in your value you can better define you’re pricing. Having pricing options works for service based industries for product based this pricing will result in more of a hard numbers game.
Here a few things you should consider before setting a price for your product or service.
1. What does the market say?
2. What are your competitors charging?
3. Where will you position this?
4. Who is your customer?
5. What is the value?
Develop a pricing strategy. There are several ways to go about this. The first is Cost-plus pricing. This is an approach that simply means calculating your production costs and then adding in what you need to make in profit. This will create margins you feel comfortable with but may or may not take into consideration market changes and changes in your production costs. So you will need to continually review this form of pricing.
Secondly, you may want to benchmark pricing. What this means is taking time to do research on the marketplace, competitors and costs. This will help you to create an industry standard where you can make an educated decision on how to set price base on the industry variables.
For service based industries I always encourage my small business owners and start ups to take a look at their competition and do a deeper dive into their vision. In an effort to set pricing you first need to know your value. So start with with this simple equation and this becomes your base.
Amount you want to make/Year
52 Weeks
#days you want to work per week
# hours you want to work per day
=
YOUR HOURLY WORTH!!!
Example: $140,000/52weeks/5days/6hrs = $89.74/ hour
Once you have your base you can now start to build in profit. Remember charging that number an hour will only have you breaking even. And even though your passion isn’t in the money you didn’t get into business to be broke. SO know your value, know your profit and create quality so that negotiations are in your favor.
