Your product price should vary depending on a number of factors including:. In order to make this call one way or the other, you should first understand what's already working. Analyze the profitability of your existing products, so you can do more of what works and stop doing what doesn't work. You want to find out which of your existing products are making money and which are losing money.
You may be surprised at how many of your products are losing money -- fix those ASAP. You should also constantly re-evaluate your costs. To sell it right, you have to buy it right. If you are having a hard time selling a product at an acceptable profit, the problem may be that you are not buying the product right. It may be that your cost is too high rather than your price is too low. When to Raise Prices -- and How You should always be testing new prices, new offers, and new combinations of benefits and premiums to help you sell more of your product at a better price.
Test new offers each month. Raise the price and offer a new and unique bonus or special service for the customer.
Measure the increase or decrease in the volume of the product you sell and the total gross profit dollars you generate. It is a fact of life in business that you will have to raise prices from time to time as part of managing your business prudently.
If you never raise your prices, you won't be in business for long. You have to constantly monitor your price and your cost so that you are both competitive in the market and you make the kind of money you deserve to make. If a price increase is too high, customers will react pretty quickly.
Also watching the competition can help - if you've made a positive change in prices; competitors are likely to follow suit.
You don't want to alienate your existing customer base by raising prices too steeply, especially during a recession. If the customer perceives that the firm's costs are going down while their price is going up. This will not be received well and is likely to backfire. You can always choose to discount your products or give customers something for free in order to get them to try your product or generate traffic to your storefront or website. You can make Wednesday senior citizen day when seniors get a 20 percent discount.
Then maybe you can offer a student discount day. Then all you're doing is keeping the price the same, but to those people you're giving them a cut but it's not like you've lowered all prices. It's not enough to look at overall profitability of your company every month.
You have to focus on the profitability or lack of profitability of every product you sell. You have to make absolutely sure you know the degree to which every product you sell is contributing to your goal of making money each month. You owe it to yourself and to your business to be relentless in managing your product pricing.
Remember, how you set the price of the products could be the difference between the success -- or failure -- of your business. Making the Case for Higher Prices. The problem was getting readers to pay. What if he gave the content away?
Tempted to cut prices? The Price Is Right Setting prices has always been more art than science. New software aims to change that. The Right Price Too many new entrepreneurs harm their own prospects by under pricing their goods and services. But if those company owners just take the time to think, they can set their prices closer to fair market value.
Is It Time to Raise Prices? Boost your bottom line by taking the guesswork out of pricing. Flexing Your Pricing Muscles Despite years of almost no inflation, you may have more pricing power than you think. Here's how to exercise it without bruising yourself in the process. The Art of Pricing: Steinmetz, and William T.
Brooks National Federation of Independent Business This trade association for small and mid-sized businesses maintains a section on how to set prices, when to give discounts, and when to raise your rates, among other topics. Small Business Administration Government agency for small business matters operates a website devoted to market and price decisions that businesses must make.
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Enter your email to reset your password. Or sign up using:. Sign in if you're already registered. Straight to Your Inbox. How to Price Your Products. Pricing a product is "probably the toughest thing there is to do," according to an expert. Here's how to tackle it. Elizabeth Wasserman is editor of Inc. The Art of Pricing: SurvivalWare SurvivalWare is a software tool that shines the light on your cash flow and profitability.
Everything you do in setting prices must be measured by the degree to which it helps you make money and create cash flow.
It is powerful, yet easy-to-use. Small Business Administration's "Pricing Your Products and Services Profitably This guide discusses how to price your products profitably, plus various pricing techniques and when to use them. Risk Management Association's Annual Statement Studies One of the few sources of benchmarking data from the financial statements of small and mid-sized businesses that are customers of RMA.
Broken down by industry, this data can be used to help you set prices for your services. You're about to be redirected We notice you're visiting us from a region where we have a local version of Inc. Enter your email to reset your password. Or sign up using:. Sign in if you're already registered. Straight to Your Inbox. How to Price Business Services. Advice for small businesses on how to manage pricing strategies by calculating costs, considering different pricing models, and evaluating customer and competitor behavior.
Elizabeth Wasserman is editor of Inc. Based in the Washington, D. This standard method of pricing in business seeks to first determine the cost of making a product or, in this case, providing a service, and then add an additional amount to represent the desired profit. To determine cost, you need to figure out direct costs, indirect costs, and fixed costs.
Those costs include a portion of your rent, utilities, administrative costs, and other general overhead costs. You need to be aware of what competitors are charging for similar services in the marketplace, Osteryoung says.
This information could come from competitor websites, phone calls, talking to friends and associates who have used a competitor's services, published data, etc. Compete on service, ambiance, or other factors that set you apart," Osteryoung says. If you have to compete on price to win a customer, you may ask yourself whether that customer will be loyal to you if they find someone offering a service at a lower price.
You want to establish long-term relationships in the marketplace. This is where a lot of the subjectivity comes in when setting a price for a service. When you have a product, you may decide to use keystone pricing, which generally takes the wholesale cost and doubles it to come up with a price to charge and account for your profit. With a service, you can't necessarily do that. To your customer, the important factor in determining how much they are willing to pay for a service may not be how much time you spent providing the service, but ultimately what the perceived value of that service and your expertise is to them, Osteryoung says.
That is where pricing becomes more of an art form. Small Business Administration advises that the cost of producing any service is made up of the following three parts: These are the costs of goods you use in providing the service.
A cleaning business would need to factor in costs of paper towels, cleaning solutions, rubber gloves, etc. An auto repair business would tally up the cost of supplies, such as brake pads or spark plug, which are being installed by service people.
You may want to include the material list with your estimate in bidding for a job. This is the cost of direct labor you hire to provide a service. The SBA recommends using a time card and clock to keep tabs on the number of hours of labor involved in providing each service for a customer.
These are the indirect costs to your business in providing services to customers. Examples include labor for other people who run the firm, whether administrative assistants or human resources personnel. Other overhead costs include your monthly rent, taxes, insurance, depreciation, advertising, office supplies, utilities, mileage, etc.
The SBA suggests that a reasonable amount of these overhead costs should be billed to each service performed, whether in an hourly rate or a percentage. One important thing to note: You need to charge customers rates that cover your current costs, including higher salaries to employees, inflation, etc. Here are some benefits and risks associated with the following pricing models: Charging an hourly rate. For many businesses, pricing services on an hourly rate is preferred.
This ensures that you are achieving a rate of return on the actual time and labor you invest in servicing each customer. Hourly rates are often used when you are pricing your own consulting services, instead of pricing a service that uses labor and materials from others.
Your rate should be determined by your amount of expertise and seniority; a more senior consultant will generally be paid a higher hourly rate than a less experienced or junior consultant. The SBA recommends that one's travel time be included as an extra charge. Sometimes even consultants are asked to price a service on a project or contract basis. That contract needs to factor in clerical support, computer or other services, and overhead expenses, the SBA advices. Charging a flat fee.
In tough economic times, many businesses are concerned about keeping costs down and may agree to hire your business for services only on a fixed-rate or flat-fee basis. It's a question of who is going to bear the risk.
If I charge a flat rate, I am bearing the risk. If you have a customer that insists on a flat fee, you may want to see if they are amenable to putting a cap on the number of hours involved in the project or agree to pay additional fees if the project runs over that time.
In addition to determining a fair price for your services, you have to determine whether you will practice a fixed-price policy and charge all your customers the same amount or whether you want to institute variable pricing, in which bargaining and negotiation help set the price for each customer. I have a hard time with that," Osteryoung says. But in general, charging different prices to different customers will create ill will. People will talk about it and they will find out.
Do raise prices when your competitors are raising prices. If the competition has upped the ante, that is a good signal that the market can and will support a price increase for your services, too.
In conclusion, pricing your writing services requires a deep understanding of your research, writing, and typing skills, as well as the topic, its level of depth and the client's work style. You need to be honest about your financial expectations and overall skills, too.
Review: Pricing Your Writing Services - a guide to setting your freelance copywriting fees, by Steve Slaunwhite. Review by: Nick Usborne If you are a freelance writer or copywriter, you have to answer the same question all of us face almost every day of our freelance careers.
Pricing services is more difficult than pricing products because you can often pinpoint the cost of making a physical product but it's more subjective to calculate the worth of your counsel, your. The prices for writing do not include conducting any primary research. Our writers will not be able to gather primary data for your academic work using such data collection methods as questionnaires, interviews, focus groups interviews, observations and others due to geographical reasons and time/resources required.
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