Pricing can be tricky. We know that often becomes a sticking point for many business owners. If you’re not sure where to start, or if you’re just googling the competition to see what they are pricing, we recommend taking a step back. There are a few precise and logical steps you can take to help you feel really confident about your pricing – and that will get you back to the business of making and selling what you do.
1) Set Your Baseline
It’s time to get really honest with yourself. What is the baseline for making your business successful?
Here’s what you need to take into consideration.
- Material Costs
- Labor Costs (Including Your Own)
- Employee Expenses
- Travel Expenses
- Inventory
- Overhead Expenses
- Website Fees
- Advertising
- Anything else you are paying for to make your business run
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We call this “Sanity Check Math.” The final figure is what’s going to keep you profitable, and ultimately feeling good about your sales. It doesn’t feel good to barely make a profit – or to not make one at all. And ultimately, it can be the demise of your brand.
By the way, this is where service brands can get stuck. Even if you don’t have material costs, you still need to work out how much time your service is costing you. How much do you need to be making in those hours?
Don’t immediately price yourself out of business by providing an awesome offer that’s well below your baseline. Take a moment, work out the math, and think logically about your starting point.
2) Competitive in the Marketplace
Now here’s where you get to start moving that needle up. Think about what you’re offering, in comparison to your competitors.
- Is your product significantly better?
- What makes your service special?
- Are you providing value to your customers?
- Can they perceive the value you are providing?
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These factors make a difference in how your price yourself, above your baseline. Even if your competitors are offering cut throat prices, if you can set your brand apart, you can increase your price above theirs – and ultimately increase your profit.
3) Evolving Over Time
Once you set your price, you’re not locked in for a lifetime. In fact, being flexible will be key. As you do, remember these two factors:
- You have to price over your baseline to stay profitable.
- You can’t control what your competitors are doing.
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But you can control how you make your offer. Always be open to new ways of doing things. Maybe you decrease your price to stay competitive. Or maybe you increase it to create a more exclusive product or service. Maybe you add value or combine products or services so you can raise that price. Or maybe you remove products or services from an offering to decrease it. Trying new things, within the parameters of the math above, will help you find that sweet spot and help you stay profitable as the market changes.
Remember it’s not just about asking for what you deserve. It’s also about providing your customers with a price point they feel good about, so they will return or tell their friends about it. When you’re both feeling great about that price, you’re really on to something. Want to talk more about how to get your brand off the ground? Contact us anytime.
And don’t miss the e-commerce series we did, full of great information about online sales. (Click here to see those past articles.)
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Photo by Josh Appel on Unsplash