I find that many business startups have a problem pricing their services. This could be because they do not know their worth, they want to compete in the marketplace, or because they are scared that someone will not buy their services. Either way, a business owner has to price services in order to make a profit.
If you have a tangible product then you should look at the costs of your materials, how long it takes you to make, and how much you want to earn per hour. To reduce your costs you may want to buy some items wholesale, bulk, or purchase a lot when materials go on sale. You must equate your product to what the marketplace is and examine your clientele. Demand is what drives the prices up and down. Regardless of what another business is doing you have your own bills and responsibilities. If your product is worth $100 then charge that, but if its only worth $25 make sure that you are not gouging your customers on your mark up.
Prices can also be dissected based on location. If you are in a rural community then you may want to charge less, but if you are in a mainstream city your prices on the same merchandise may need to increase. You never want to short change yourself, because there is always a minimum to recoup your costs. If you are a vendor you need to add in the costs of your booth, gas, travel, etc. when pricing your items. Most people forget about all those costs, but they are important to bringing you a realistic profit over what the booth fee is.
Service oriented businesses seem to have the hardest time pricing services. We are worth so much because we tend to do the jobs that others don’t want to do. For instance, marketing is something that can easily be measured in hours, contacts, emails, and reach of audience. One way to price your services when you are in a service business is again to assess how much you want to make per hour and then see how much work you are actually doing for a client during that time frame. This way you can have billable hours and if you charge $40 per hour, worked 15 minutes, then your client owes you $10.
Here are a couple of online tools that you can use to aid you in pricing your services and keep track of what profit you really made.
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Chisa D. Pennix-Brown, MBA