For many new business owners, one of the biggest challenges is determining a fair price for their products or services. You don’t want to charge so much that people will choose your competitors, but you also don’t want to lowball your prices and fail to make a profit. To help you make this important decision, we asked a panel of Young Entrepreneur Council members to weigh in on the following question:
“When you were first starting out, what process did you use to determine the price of your product or service? How has that process changed between then and now?”
Here’s what YEC community members had to say:
How Much to Charge
1. Set a Revenue Target
“If you know how much profit you want to make, and how much profit you believe your products can make, that’s a solid place to start. You can start building prices for your products based on each one’s value to determine how you’ll meet your goals and how much you’ll have to sell to do so.” ~ Jared Atchison, WPForms
2. Double Your ‘Day Job’ Rate
“When I first started as a freelancer, I took my “day job” rate and multiplied by two. Upon scaling, new expenses had to pile up, from hiring to software licenses, new gear and a small office space. Taking all of those into account and aiming for a “safety net” of three months ahead was my goal. After that, quarterly and annual financial reports were determining the target margins.” ~ Mario Peshev, DevriX
3. Consider the Value to the Client
“When I first started out in determining our rates, I looked at the value the client would get from our services. I looked at how our strategies would help earn them more revenue, generate more traffic and get more email subscribers, and I would develop client quotes based on that.” ~ Kristin Kimberly Marquet, Marquet Media, LLC
4. Triangulate Fairness, Profit Margins and Current Market Conditions
“I have always set my prices according to three factors: First, what profit margin do I need to make to have a sustainable business flush with cash? Second, what is the current price in my market for a similar product or service? Finally, given the answer to the first two questions, what feels fair and still allows me to create a sustainable business flush with cash? This has always worked out very well for me.” ~ Justin Faerman, Conscious Lifestyle Magazine
5. Leave Room for Your Rates to Grow With Your Business
“We used to joke that when we were starting out, our fees were “whatever people would pay us.” As we’ve grown and matured, our fix structure has also matured. We’ve built complex matrices to support building out our fees, eliminated “low-cost” pricing tiers that weren’t suited to our efficiencies and skill sets, and implemented better alerts to identify out-of-scope costs early and upfront.” ~ Bill Gerber, AccountingDepartment.com
6. Charge Slightly Less Than Your Competitors
“The best way to win over your competitors’ business is by creating prices that can’t be beat. We looked at our competition to get an idea of what we should sell our products for, and then charged a small percentage less to attract more customers. Now that we’re more established, we have data to go off of, but in the beginning, this was our method.” ~ Stephanie Wells, Formidable Forms
7. Conduct Thorough Market Research
“Doing your due diligence is the most important step in deciding the price of your product or service. What are your competitors charging? What makes you different from your competitors. When first starting out, it’s important to demonstrate your value, so you also need to be sure that your product is as perfect as it can be and your process as streamlined as possible.” ~ Brian David Crane, Caller Smart Inc.
8. Reflect Your Expertise In Your Price
“When we first started out, we used the time and material model. Today, we get paid for the size of the problems we solve, not just for the time. The pricing is value-based. Remember, a locksmith gets paid for knowing where to drill the hole, not how long it takes to drill the hole. It’s not about the time spent on doing work; it’s about the skills and expertise which allows you to do it.” ~ Solomon Thimothy, OneIMS
9. Learn What Feels Right by Trial and Error
“When I first started my business over a decade ago, I had no idea how to price our services. I looked around at what some other folks were doing, and decided on a number that felt OK for me. Thankfully I learned over the years to increase our prices and charge our worth, but truly it’s a process of trying and seeing what works.” ~ Rachel Beider, PRESS Modern Massage
10. Keep Testing as You Accumulate Data
“It’s important to keep testing different price strategies and measure what works best. The best information comes from solid data. So, make sure that you test different strategies and see what drives the most conversions.” ~ Syed Balkhi, WPBeginner
Image: Depositphotos.com
This article, "How Much to Charge? 10 Ways New Businesses Can Determine Their Ideal Prices" was first published on Small Business Trends
December 12, 2019 at 06:25AM
via https://www.aiupnow.com
The Young Entrepreneur Council, Khareem Sudlow
