Tips for pricing your products and services

One of the most important things to consider when you are running a business is how to price out your product or service. When you are pricing out your product or service you will need to take into consideration many factors so that you can accurately price your product or service. Pricing your product or service is important because your price is what makes your business profitable, but at the same time you have to be competitive. One thing you need to keep in mind is that pricing a product is a little bit different from pricing a service because offering a service has a few more costs then simply selling a product.

Here are some tips that you can follow when pricing out your product.

Tip one:
The first thing that needs to be taken into consideration is how much you have paid for the product to resell. This is actually pretty straightforward because when you are selling products, unless you are the person manufacturing the actual product you are buying the product from the manufacturer to resell to the public. So what you want to keep in mind is how much you are paying the manufacturer to purchase the product, not what you pay for the bulk purchase but what you are paying for each individual unit.

Tip two:
You should also take into consideration what the suggested retail price is, some stores can afford lower prices while others can only sell it for the suggested price. But in order to find out what the suggested retail price is you are going to need to do some research. But you can also ask your supplier what the suggested retail price is.

Tip three:
Now you need to take into consideration all of your costs that are needed to sell your products. This is where it can get tricky because you will have both fixed and variable costs that you need to take into consideration, but you also have to break down those numbers to figure out what one unit will cost to sell. Rather than doing this some retailers simply add on a percentage markup to cover all of their costs. Either method will work, as long as you don't go above the suggested retail price.

Tip four:
Now you will need to add up all of these factors to determine what your final selling price will be. Keep in mind that you want it to be somewhere around the suggested retail price, but if you can go lower and still make a profit that is a great thing to do. One thing that you want to stay away from is going higher than the suggested retail price because your business will not be successful if your customers have to pay more for the same products.

Here are some tips you should keep in mind for pricing out a service.

Tip one:
One thing that you are going to need to think about is that in order to price out a service is that the first thing you are going to need to do is to consider some common pricing factors. Some factors to consider are pricing history (what others are offering for the same service), any special requirements (such as shipping or packaging), special options (warranties), bidding costs, and your overhead and profit.

Tip two:
After you have figured out the common pricing factors what you are going to want to think about next is your overhead costs. What you are going to need to do is to determine your true overhead costs, which is where many small businesses tend to get messed up causing them to be either unprofitable or uncompetitive. Most small businesses simply tend to apply a percentage to the service that they hope will cover all of their indirect costs, which is not the correct way to go about it. To determine your true overhead costs you should use a form of activity-based costing, which allows you to look at every cost of your business that is related either directly or indirectly to the service that you are offering, including heat, gas, payroll and numerous others. Even though activity-based costing is geared more towards large businesses, you as a small business can adopt a simplified form of it to determine your true overhead costs.

Tip three:
Now that you have received everything you need about the job you are doing the service for you and have figured out prices for everything you are ready to put your bid together. What you are going to need to do to put your bid together is to add up all of the costs and then apply a certain percentage to your bid so that your company makes a profit while covering all of the expenses.

Just remember knowing how to price out your product or service is what keeps you both profitable and competitive in your business.