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How to determine a margin for the product or service you provide in your home business


How to determine a margin for the product or service you provide in your home business. This is something that all home business owners think about. The reason is that you do not want to overprice your product or service, which will keep you from selling your service or product. However you also do not want to under price your product or service so that you will not be able to survive in the business. So how do you know where to set your margin?

The margin needs to be sufficient to cover the overhead, and generate the profit needed to keep the home business going. The way this is done, is determining two main factors.


1. What will the market allow?
2. Where is your profit margin?

In order to find out what the market will allow, you need to determine what the value is of your product or service. There are a few things you can look at to decide where your product or service is in the line of the business. Does your product or service offer a unique demand? Is there something about your product or service that will get your target market interested in buying it?

The less competition you will have is based on how valuable, needed and unique your product or service is. If you are the main provider of that unique product or service than you would be considered the market leader, and then of course you have a great deal more options when it comes to setting your margin for profit. Therefore giving you a little more leniency for the pricing you want to assign to your product or service. However keep in mind that even a great product or service that is price high, will likely not have the turn around expected.

If the margin and therefore prices are set too high, the consumer will find something else to purchase or simply will not purchase the type of product at all. Grandma's apple pies may be the best. A consumer may be happy to pay $15 for the pie. However if you price Grandma's delicious apple pie for $25, you may be asking for no business at all. Because Joe has pies down the street that may not taste as good, but he is selling his pies for $10. Consumers are not stupid, nor are they that hungry.

If you are a market follower, which means that there are already providers for the product or services you offer. Then the margin you set along with your prices will have to be in line with the competition. Because the more competition there is, the lower chance you have for obtaining the consumers business.

This is when it will take some strategic planning and thinking on your part for setting your margin so that you can succeed and survive in that type of competitive market.

The way to do this is by comparing the prices and products that are being sold by your competitors. There are many times that these businesses have already built their clientele, and you are coming in as a small business on their coattail.

With this in mind you will need to remember that in order to determine the margin for your product or service for your home business, you will need to use creative marketing to make your product, or service better than your competitors.


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