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Getting the right price for your products and services can often prove to be much harder than it seems. Bear in mind that price is not the only consideration that customers will take when making a purchase decision. Quality, if they like you or not, after sales service and recommendations from friends are often even more important that price.
A low price will often be perceived as being a low value or service. There is such a thing as being too cheap.
When starting a business, it is always tempting to start off at the "charity rate" by quoting a low price during your negotiations with your initial customers. Obviously, you then increase your chances of getting some customers to buy but your hourly rate will probably be poor. This is a common method used by new business start ups. While it is not necessarily a mistake, it is not sustainable in the long term.
If you intend to use the above method, just make sure that the rates you intend to charge initially to get your business of to a faster start are included in your business plan, including an estimate as to when your rates will increase.
To make money and achieve your goals, you need to charge the maximum amount that customers will pay for your level of product and/or service.
To get the right price for your products or services, you should first do research into your competitors charges. Since you will probably have a unique selling point, your best price may not be the same as your competitors. You may need to go higher to pay for the extras you provide or lower to reflect the savings your company enjoys.
The next step in finding your best price should be to vary the amount you charge. If your prices are too low you will have more work than you can handle but your hourly rate will be poor. In other words, you and/or your staff will be working harder than you need to for the same money.
Raise your prices a little at a time. More and more customers will say no to your business. Be brave, get some no answers. When your net profit goes down you know you have gone past your maximum price. At that point, too many customers will have been going to your competitors for alternatives too often and your income will go down.
Remember that it is OK to have some customers say no. After all you can not please all the people all of the time. If every customer is saying yes, that could be a good indication that you are too cheap.
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