If you run a service business, how much is your time worth? And if you sell widgets, how much should you sell them for?
Small biz owners are notorious for under-pricing, but the difficulty is in knowing what to charge?
Some methods commonly used to arrive at price:
Cost based pricing (ie work out your costs and add your desired profit)
Market based pricing (what price can the market take)
Value pricing (what is the perceived value of your service / product to your client?)
These sub-divide according to your strategy - what are you trying to achieve? If its market penetration, then a lower short term price than will be expected in the long run would be the norm (think about when a supermarket introduces a new product line).
Alternatively if at near capacity already, and you are still in demand, then a 'skimming' / premium pricing approach could be relevant - ie price higher than 'normal'.
In most cases I reckon a combination of the three methodologies above is appropriate. An ESSENTIAL step is to know your cost base - if you don't know this, how do you know you haven't gone and lost money when you next sell that hour of your time, or that box of 25 widgets?
No comments:
Post a Comment