How To Know What To Charge
When you start a home business, you’ll come across many questions that need to be answered before your company can launch. One of the most important questions is: What are you going to charge for your products or services?
When setting prices for your home business, it’s important to strike a balance between making profit and making sure your product or service is affordable for your customer. A great deal of research should go into your company’s pricing system including knowing your industry, considering all your costs and more.
Here are 5 helpful tips and factors to consider when setting up your company’s pricing system:
1. What are your competitors charging? Be it a commercial business or a home business just like you, find out what prices your competitors are asking for the same product or service. Knowing this information will not only give you a good idea of what you should charge but it can also give you a marketing angle if you can offer your products and services for a lower price.
2. How much does it cost you to provide each product/service? Be it materials, time or expertise, how much does it cost for you to provide that good or service to your customer? Put a reasonable hourly rate on yourself to price out what your time is worth. A good idea would be to use the amount of money you were making per hour at your last job because you know you probably don’t want to end up with less than that. After you’ve figured out what your time costs, ask yourself how much time it takes per job.
3. What are your indirect costs to starting your home business? Keep in mind that the materials and time you put out for making each product aren’t your only costs. You probably spent money on many other things like home office supplies, software subscriptions and other tools that help you to run your business. Take the sum of all these costs per year or month and divide them by a goal number of products/services you hope to sell in that same time period.
4. Within reason, how much profit were you looking to make? After you consider the product’s costs and your indirect costs, the next step is to see if there is still room in your price for your own profit. If there isn’t much room, one way to offset the costs would be to find cheaper solutions. Ask yourself how many telephone lines you need. Question whether or not you need to print all your documents on paper. Cut costs on the back end so you can make more profit from the front end. The lower the cost, the cheaper you can make your product and the more customers you will attract.
5. Set your price slightly above the absolute lowest price (with profit) so that you can run sales and still make money. Sometimes it seems strange when stores offer deals much lower than the normal price. How can they afford this? They’re cutting their amount of profit on each product to attract more customers. The key is to set the right price from the start. If you overshoot your profit just a little, you can run deals just like all the other stores when necessary. Just make sure your initial price overshooting doesn’t scare away customers.
Looking for something a little different? Want to see our very best business opportunities of the month? Click here for our platinum, gold and silver opportunities!