An often-neglected part of home business is the pricing of your
services. You know what you can do, you know there's a market
for it, but do you know how much you can get away with charging,
without putting the customers off? Here are a few tips to
maximise your profit margin.
Find Out What Your Competitors Charge
Ring round some of your competitors (you might want to use a
fake name), and find out what they're charging for the services
you offer. You can then make a price comparison table. If you're
working in an industry where price isn't a big thing customers
look at, you might charge around the average of your
competitors' prices. If price is a big factor in your industry,
play aggressively -- put your table in your advertising
materials, and price yourself so you beat everyone on the list
(you might not be able to do this in some industries, however).
Be aware, though, that you might not always want to be the
cheapest out there. Somewhat strangely, you might find that you
can take away a competitor's business in some industries simply
by moving into that sector and charging a higher price than they
do for similar products. One of the biggest secrets of pricing
is that people assume price means quality, and purchase
accordingly. There's jewellery out there, for example, that is
priced at thousands of dollars but only really worth a few
hundred -- what people pay for, oddly enough, is the status that
comes with buying something with such a high price.
An Easy Formula: Cost Plus Time Plus Margin
If you'd like to be more scientific about your pricing, here's a
way to do it. First, work out your costs. This is any materials
that you use for your work, as well as your overheads, such as
electricity, advertising, lawyer's fees, and so on. Once you're
done, you should have figured out how much each product you
offer costs you, before you include the price of your work. You
should overestimate this number, but not by too much.
The next step is to factor in a charge for your time. Basically,
work out how many hours it takes you to provide a product, and
then work out the pricing so you're getting a satisfactory
hourly rate. It's up to you what kind of rate to set for
yourself -- start at minimum wage, and then work out how each
increase would affect the price. A good guide is how much you
would expect to pay an employee to do the job for you if you
ever expanded to the point where employees were needed.
This is also a good opportunity to see if there are any
efficiency savings you could make: if there's a service that
would take two hours off the time needed for one product, and it
would only cost you one hour's pay to get that service, you
should do it.
Finally, once you've added cost and time, you need to add in a
margin. This should typically be about 30-50% of the price
you've come up with so far. This money will be good for
investing in expansion, paying taxes, and covering yourself
against anything else that comes up.
Don't Get Emotional About It
If you're selling something that you've put a lot of work into
-- especially something that you've worked hard to make -- you
might feel that the market price doesn't represent the value you
feel it has. This is a terrible trap to fall into, as you're
very unlikely to ever be able to sell anything if you've priced
it too highly out of emotional attachment. You need to accept
ahead of time the kind of prices you're going to get for things,
and think of them as being worth that much.
Always Be Willing to Negotiate
You will get customers who want to negotiate with you over your
prices. Play them at their own game. Make it look like you're
making silly negotiating errors so that they feel like they're
getting a really good deal. Just make sure that you know the
minimum price you're willing to take before you meet with them,
and don't take any less.
About the author:
Original Source:
Articles-Galore.com
Information supplied and written by Lee Asher of The Home Income Portal
Home of Serious Online Business Options.
