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When you’re trying to run a successful business, sustainability is critical. This is especially true when it comes to how much you charge for your goods and services. While you want to stay competitive, trying to compete too much and go too low can leave you struggling to keep the lights on, never mind a profit. So, if a race to the bottom isn’t the way to go, how do you decide how much to charge? Here, we’re going to look at a few points to consider.
Research Your Market
First and foremost, you should make sure that you’re aware of the broader context of pricing in the market around you. Looking at what competitors are charging for equivalent services and products can help you get an idea of the average price, but don’t fall into the trap of undercutting just to compete. Low pricing often signals inexperience or desperation. Take into account the kind of client you’re trying to grab and the level of service you intend to offer. There are differences between premium, mid-range, and entry-level pricing options. Consider which fits your business best.
Ensure You’re Covering Your Costs
You want to not only cover the costs of keeping your lights on, but you also want your goods and services to provide a return on investment on everything that went into making them happen. This includes not just materials and stock, but also bigger expenses like equipment you use for production. If you’re renting out equipment, like dumpsters, for instance, then you should incorporate the whole dumpster cost, and figure out how soon you want to be able to pay off that cost. Pricing should go beyond the product or service itself; it should incorporate everything it took to get it in the hands of your customers.
Consider Value, Not Just Time
Pricing isn’t just about the time you put in; it’s about the value that you’re able to provide to customers. This includes your own level of expertise. If you help someone save time, grow their own business, or solve a painful problem, then that should translate into real value. Clients and customers are willing to pay more when they get a reliable and high-quality result on the other end.
You Don’t Have To Stick With One
Your first price point doesn’t have to be the price that you run with forever. Start with a number and test it in the real world. You can then tweak it, depending on whether it seems too high for your customers to take an interest, or not high enough to help you work towards a profit. Creating different service tiers and pricing them appropriately can help you capture a wider range of customers, as well. This way, you can ensure that you have something to match all of your audiences rather than cutting out some potential customers.
The price point you’re able and willing to charge is going to very much depend on your own circumstances. Hopefully, the tips above will help you narrow down the answer.
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