How do you decide what to charge for your products or services?
It’s a very common problem for small businesses, says Bob Dahms, a business counselor with the Bellingham, Washington chapter of SCORE. For those unfamiliar with SCORE, it’s a non-profit, nationwide organization that offers free counseling and low-cost training workshops for small business owners.
In a recent column appearing in The Bellingham Herald, Dahms looks at examples of expense structures and pricing strategies for several business types, ranging from a small, home-based service on up to a major retailer. He says one reason why pricing is such a difficult issue is because different businesses’ expense structures vary greatly. “Sometimes people who have some experience in one business assume that another business is the same,” he writes. “This is a mistake.”
Here’s the full column, which also explains the difference between “markup” and “margin.” It provides some good food for thought — especially for anyone who might be putting together a business plan right now.
This is a very important question. Pricing affects your ability to make a profit. Pricing is very much a challenge in this economy when there is the downward pressure on your price due to everyone being cost conscious and the upward pressure from increasing supply costs.
Given current economic conditions, it may be tempting to change your price strategy — but in the long run, you’re better off if you don’t. It can be confusing for customers, among other things.