finance articles businesses business management business marketing Technologies finance accounting Industrial Manufacturing starting a small business Investment health information

What you should know about pricing

One of the major decisions that you will need to make when establishing your business is how much you should price your products or services. What to set your prices at is an important consideration because if you price what your business offers, at to low of a price then your customers may not see the value of it and decide to buy elsewhere. If you price your products or services to high then you may simply have priced yourself out of the market. The state of your business finances may very well depend on how well you price your products or services. There are several different things that you can take into account when determining price. Here is what you should know about pricing-

- How much does it cost to make the product or offer the service? Your first step is to take into account all production costs. Most products (and some services), will have both fixed and variable costs. The first step is to take the entire cost of production and break it down to a per unit price. This will let you see how much it costs to produce one unit of whatever your business is offering. Once you have determined the cost of production then pricing becomes much easier. The following formula has been recommended by business finance experts in order to determine production costs-
1. Determine total fixed costs of production
2. Determine totalvariable costs of production
3. Add both sets of costs together and then divide by total sales. Depending on where you on the business cycle keep in mind that these may need to be estimated figures.
You will then know what the total production costs are for each product that you make and the minimum you will need to price them at in order to cover the costs.
- What is the demand for your product or service? Before you can price your product or service you must be able to realistically determine how much demand there is for it. It stands to reason that if your product or service is in high demand right now then you will be able to charge a higher price. You should keep in mind that there are many different factors that can influence the demand for your product or service. These include but are not limited to: your customer's income live, the amount of competition that you have, and the current conditions of the economy. You should also keep in mind that if your product or service is used in conjunction with something else then the price of both items will go up and down together. The bottom line is that the key to successfully determining the amount of demand for your product or service is careful and thorough market research.
- What is the lifecycle for your product or service? Each item that is on the market will have its own lifecycle. You should carefully consider what the lifecycle is for the product or service that you are offering. Keep in mind that if you are offering a product or service that will be around for many years you will price it differently then if you are offering a trend or fad item. R
- What is the standard in the industry? The reality is that no matter how wonderful you think your product or service is, if it does not match the industry standard then there is little chance that you will be successful with it. Keep in mind that today's customers are not only shopping with the store down the street but could be shopping with a business just like yours from halfway around the world. You will need to take into account what prices are being offered throughout your industry in order to correctly price your products or services and maximize their profitability.

FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *

Get More Business Info
Sponsored Links
Recent Articles


Copyright 2003-2020 by - All Rights Reserved
Privacy Policy, Terms of Use