Pricing Startup

Pricing Your Product or Service

Making a Profit

 Generally, the price of a product depends upon the market for the product. To most people in a small business this usually means pricing to the competition. In many cases this is a valid approach, however it may be the first point at which one determines whether or not profits are available for your product or service.

The Pricing Is Right

There are various factors involved in the target price. The most important is your target customers and their ability to pay for your product or service. This is the reasoning behind the discussions of market research and demographic studies above. Remember you are in business to sell products or services and make a profit.

 Therefore, your price may need to be competitive but it must also contain enough margin to pay for all the supporting functions necessary to supply the goods. This will become clearer later during the financial development phase of the Business Planning process.

 However, there is another important consideration that is often overlooked in pricing. That is the quality of your product or service and the target market's willingness to pay more for your product or service than your competition.                                                                                    

 Example :

 Mary made and sold dolls as a crafter and charged what she thought the doll was worth, given her work and the cost of the materials and the market she experienced. About $25.00 to $40.00 on the average.

 Mary now realizes that she fashions dolls by hand out of antique fabric and uses her artist's talents to make unique collector dolls. She was coached into structuring her pricing to more match her talent to create a unique product and target those people who wanted a uniquely crafted doll created out of rare antique materials. Mary is now able to get much, much higher prices for her creations. One sold for $1200.  

 I have had clients who simply don’t charge enough for their services. Some are professionals and operate in a marketplace that justifies higher fees and, in fact, the firms in this field would be suspicious of anyone who charges too little. For instance, I once worked with a Chiropractor who had exploited his knowledge of Chiropractic Medicine to produce back safety programs for large trucking companies, insurance companies, county fire companies and hospitals.

Under pricing

Dr. G. needed help to not only grow his market, he needed to restructure his pricing to reflect the strata of companies he worked for. Some of these companies were nationally known firms in the Fortune 100. He was only charging $ 800 per day for his services. The realm, within which he operated, demanded higher charges. That’s right you must charge what the client expects or he will suspect that your services are not worth even the lower price.

Within months I had helped him raise his daily rate to $1,100 per day on his way to $2000 which was still far below the daily rate for a consultant who works for a large accounting firm and operates in the same corporate strata.

Are your products priced properly in your market? Need some help? Give me a call.

                                                                                                                                                                    RJS