Tweet

Entrepreneurs - How Do You Set Your Prices?

Written by:

Article Overview: You’ve set up your new business or you have an established business with new products, so you come across that age old problem – how do you price them?

Entrepreneurs - How Do You Set Your Prices?

You’ve set up your new business or you have an established business with new products, so you come across that age old problem – how do you price them?

Well first of all you can only charge what the market will allow at the moment unfortunately. In periods of recession, people are very price sensitive. Luxury items are difficult to sell and people want to buy a bargain. So in difficult times you need to keep this at the forefront of your mind.

Of course, you will also need to undercut other established markets, so you will need to research these well. Find out what your competitors are charging and keep this in mind.

Now look at your expected expenses for producing several of the items. At the start of your business you will only be producing and selling smaller amounts so look at your expected volumes when investigating your costs. Also take a look at your overheads and factor in some of these as well. At the start of your business you will have to cover most of these in your set up costs in order to have a viable product price.

Lastly look at the cost of sending the item to your customer – your fulfilment costs. You can add these to your product as “post and packing” if you wish.

You should now have a total cost of producing and selling the item. Now you need to make a profit in order to stay in business. Many businesses have a working gross profit (GP) that will keep them profitable and your accountant will be able to advise you on this. Other wise look at a figure of between 15% - 75% depending upon the product.

So your price is a mixture of:
• The cost of producing and providing the item, plus some of your overheads.
• The % profit that you want to add to the cost of your item.

This will be tailored by:
• The perceived value of the item to your buyer.
• The price of similar items that you or your competitors are selling.
• The price that you believe the market will stand.

You should also ensure that you do not under price the item so that it is seen as a cheap copy of existing similar products. Cheaper is not always better!

Related Articles
  Stress-Free Selling® - The Power of Belief
  Stress-Free Selling® - Easy Ways to Avoid Price Objections
  How to set your prices
  Discounting Prices: How Low is Too Low?
  The Right Real Estate Offer

Article Tags: accountant, bargain, difficult times, forefront, fulfilment, gp, gross profit, luxury items, mixture, new business, overheads, periods, recession, similar items, viable product, what your competitors



Related Forum Posts
CEOs and Email - Slaves? - I wonder if the emails they are responding to are filtered thru their assistants first 'cos they seem to spend a lot of their off hours responding to them. True they are successful but I'm not sure I'd be willing to pay that price. I'd be interested to know what's the in the typical day planner of Entrepreneurs on the Forum. Entrepreneurs are a different breed than Paid Employees- so it would be interesting to view the contrast.
Fundraising for 3rd world Entrepreneurs - How great to learn that Evan is doing something for Entrepreneurs in Africa! It just makes me even more thankful to be part of this forum! After helping create a new charity for animals in my local community last year, I created a vision for a charity empowering Women Entrepreneurs. It won't happen for a while yet, but I know it is something I will do within the next few years. As we allow ourselves to think bigger, the opportunity to impact people becomes much bigger as well. Does anyone else have a desire to really make a difference in the world through this means?
Re: Greetings from Camping Embroidery - You are welcome to the club. You are networking with the best Entrepreneurs on the whole wide web
Re: New Funding Source Now LIVE! - I have checked the site and it seems it for American Entrepreneurs only. Please correct me if I am wrong
Re: Hi from Baku - Welcome to the site. I have been reading some of your posts. I'd like to get some of your feedback in the Young Entrepreneurs section. See you there.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Earn More Money - Easy Home Business Ideas

Providing Feedback

Stay Employed In A Down Economy

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.