Establishing a price for goods and services has always been difficult for small businesses. Small business owners find arriving at a price one of the most difficult decisions they face and there is no magic formula, no firm rules and no one ideal method for setting prices, but there are many indicators that can assist. It is a matter of discovering, by careful consideration, a reasonable price for your products and services.
Pricing is also a critical marketing decision. The price you sell your goods and services for is also a key factor in determining the amount of profit (or loss) your business will make.
So what price should you sell your goods and services for? There are a number of factors that influence the price you charge.
These include:
• your costs
• your target market
• your objectives
• your marketing strategy and marketing mix
• competitors prices
• the level of demand for goods and services
• market conditions and trends
The right price is often influenced by a combination of these factors and you should only establish your price after carefully considering all influencing factors. A thorough understanding of your market through accurate research and effective planning and control is required.
Price setting is an ongoing process as your market is continuously changing, you need to adapt to this changing market. Part of this process is to periodically review your prices, are they still appropriate in this changed market?
Small businesses often do not pay due attention to their prices. Problems that can occur as a result of this inattention include poor margins on products and services, losses on specific products and services due to inflation, and a failure to re-price.
It could also mean the difference between making a profit and making a loss. Subscribe to the UMACS Business Zone monthly newsletter which gives you great tools, tips and ideas on how to manage and grow your business. Subscribe now and receive a FREE e-book “Relationships that Show the Health of Your Business”. www.umacs-business-solutions.com/umacs-business-zone.html
