Pricing Your Product

By Christina Suter on May 19, 2018 at 11:38 AM in Business Issues
Pricing Your Product

To run a successful business, people must know about your business (marketing) and you must turn a profit (proper product pricing). Mother Theresa took no money but her organization was well-funded and its outreach and impact were astronomical. You are not Mother Theresa; your business and you must earn money. You are running a business and not a charity and you need to be able to profit and pay employees, bills, and yourself. 

I want you to understand how to price your product. How do you currently determine your pricing?

"I don't want to charge too much." "I don't want to be one of those people." "It feels like I'm overcharging people." "No matter how much I charge I don't seem to break even."I will lose business if I raise my price."

Have you ever said or thought one of those statements? I have news for you- your pricing is under your control. There are very few industries where your pricing is regulated or priced in a specific way and at a certain price point. 

Three Forms of Pricing:

1. Cost of Goods- Your expense sheet includes your fixed costs, variable costs, and merchandise costs. If you haven't yet figured out your costs, ask someone good at math or hire an accountant or bookkeeper. Take your salary out and what's left is your overhead cost. I call your soft cost things that clients don't see, like hours of your time in driving and consultations.

X (direct)+ Y (soft)+ Z (overhead cost minus salary) / number of products sold over a year= product price (or less)

2. Compare within your Industry- What others charge versus what you charge must be a cognitive decision, not an emotional one. Your options are to have more business/customers or to charge more per product. Search the internet for companies who do what you do; find their rates and for how much time and materials they use. Find at least five people in your industry and determine what the highest and lowes company of the five is doing and see where your company ranks. Raise your prices or decrease your services based on your industry research.

3. Branding- When you find the five companies in your industry determine what level of branding they are. Are they McDonald's level or Chick-Fil-A level? Are you higher end or do you charge a fair price and provide basic work or product? Based on your branding where should your price point be?

Your products should be priced around the total cost of product or higher, within the range of your competition and based on your level of branding. Your belief system about pricing may be causing your business to suffer. You are the boss and you are in control of the price of your product. You owe it to yourself, your employees, and your customers to remain open and to pay yourself and you do that by ensuring you're charging enough for your product. Your job, as the leader of your company, is to earn enough to fulfill your purpose.