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When you start your own business, you face many challenges when you first start out. What are you going to sell? Who are you going to sell it to? Where and how are you going to sell it? And what are you going to charge? These are all tough questions to answer when you are first starting out. But the hardest one, I think, is what are you going to charge.
Setting your prices is no easy task. The problem is you don't want to set your prices to low and undervalue yourself but you also don't want to overcharge and not get any clients because your prices are too high. So the challenge is trying to find a price that is between the two.
So here's the thing...before you can determine your prices you have to figure out what your sales need to be in order to just break even. But before you make a profit you have to know what it takes to simply just run your business. Breaking even means you're not making a profit but you're not making a loss either. You are net zero in the game. All of your revenues equal all of your expenses.
Now once you figure that out, you need to determine how much you need to increase that number by in order to yield the profit that you desire to make. Remember you got into business to make a profit not a loss. So if you want to net a 10% profit, you need to increase your sales goal by 10%. Now the trick here is to be confident in whatever price or prices you come up with. Be sure that the price you came up with is what you feel you are worth. Ask yourself these questions - Do you have credentials to support these prices? Does the value of the work that you provide support those prices? Do you have social proof to support these price and the fact that your services are good services?
The third thing you need to do is compare your new price to the prices others are charging in your industry. Are they comparative, or way out of whack? And by out of whack I mean way left field. Completely outrageous. If so you may need to re-group. But beware - don't drop your prices to a much lower rate just because Chrissy down the street charges way less. If your work supports your prices then stick to your guns. Just make sure your not too far off the mark. In some industries, a huge difference from the market could potentially kill you business success.
Did you struggle with setting your prices? What mechanisms did you use to help you get clear on what your pricing should be?
Need help setting your prices? Contact Sherrell for a business assessment session at email@example.com.
Sherrell Martin is the Founder and CEO of Empower 2 Thrive, LLC, a boutique practice offering financial management accounting and business success strategies. She strives to empower business owners and entrepreneurs to thrive financially in life and business by gaining financial control and creating wealth and legacy. She helps business owners and entrepreneurs who struggle with business and financial organization establish systems that will allow them to create, build and maintain a financially thriving business using accounting, finance and business strategy. To receive your free copy of her Start-Up Success Guide - The 10 Critical Steps to Building a Thriving Business from the Start and a FREE subscription to her Empowering You bi-weekly e-zine, send your request to info@Empower2Thrive.com.
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