As a small business owner, you want to make sure you are doing everything in your power to find success as a business. Even the smallest mistakes can be detrimental to your success. One thing that you want to make sure you get right is the price of the products that you offer your customers. If you are overpriced, there are going to be a great deal of potential customers that will simply walk away from whatever you have to offer. If you are priced too low, you might not be making enough to keep the lights on and your business will fail. Propel Your Accounting is here to share some tips that can be helpful when you’re trying to figure out the right price for the products you’re offering.
Consider These Factors in Pricing Products
There is a lot more that goes into pricing product than simply slapping on whatever price you think the product is worth. Here are some factors that play a role in finding that perfect price:
– Variable Costs: The variable costs are going to be how much money it takes to produce your product. If you buy your product from a supplier, this is quite simple. You simply look at the price you pay to buy it, and there it is. However, if you are making your products yourself, it is much more complicated. You have to not only think about the cost of the materials you use to make the product, but you also have to consider how much of your time it takes to produce it as well. You should consider an hourly wage that you would be happy with and then consider how many products you can produce in an hour of work. This can help give you an idea of where you should price a product.
– Profit Margin: Another thing to think about is your profit margin. This is usually figured in a percentage. When you’re trying to choose the percentage you’re happy with you should consider the fact that fixed costs haven’t been considered yet, and you should also think about the overall market and what people are willing to pay for the product.
– Fixed Costs: There are costs that are going to simply be part of doing business. These costs will be there whether you are selling 1 or 100 products. Things like rent, utilities, and other costs would be considered fixed. Don’t forget to include them in your product price. You need to be able to cover them with the sale of products.
Bookkeeping, Accounting, Business Consulting & HR / Admin Services in the United States of America
If you’re having a difficult time coming up with an appropriate product price for your business, you can turn to Propel Your Accounting to help you set the products right. This will help set your business up for success right from the start. We offer consulting services to help your business succeed. Call us today!
