cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Highlighted
Level 7

Member Question: How Do You Set Prices for Your Product?

I personally find this to be a challenge. As a self-employed person, we don't want to price ourselves out of the market, but we also don't want to be underpaid.

 

Do you have any experience successfully setting prices, or perhaps your journey in finding the right pricing for you and your business? 

4 Comments
Highlighted
Level 7

Member Question: How Do You Set Prices for Your Product?

I personally find this to be a challenge. As a self-employed person, we don't want to price ourselves out of the market, but we also don't want to be underpaid.

 

Do you have any experience successfully setting prices, or perhaps your journey in finding the right pricing for you and your business? 

Highlighted
Level 4

Member Question: How Do You Set Prices for Your Product?

Cost of doing business + Salary + Profit + crew and expenses specific to the job I'm bidding on = budget for project

Highlighted
Level 15

Member Question: How Do You Set Prices for Your Product?

It depends on if this is products, services or both. Nearly all industries have Standards, such as "restaurant meal cost x 3" or whatever.

 

One way to help determine this for a Service Company: Start with what you think the annual Salary would be if you worked for another or if you needed to Hire an employee to do this, such as $52,000 for that work. Now figure out Overhead = what else it costs for you to be in business, for the year, including the replacement of any significant equipment (needing a new $30,000 printer every 3 years? Factor that into this consideration). Now, calculate the # of hours you intend to work that is performing (effective and charged) time (even if under a contract fee and not at hourly rates) + an allowed quantity for Marketing and "spinning your wheels" (contingency time for learning, making mistakes, etc).

 

Divide Dollars by Hours

 

Here is your Target Rate per hour. Now use the web to see Regional and comparison info in your market and adjust accordingly = a Reality Check.

 

Keep track of Everything. There is nothing to be learned from Not Tracking "nonbillable time" in a service business. Find out how much you Overwork a project or Underbid a contract and learn from it.

 

Not much later, revisit everything.

 

Example: you realize you need More Equipment, so you need to step up your hours and land more contracts to compensate.

 

Example: You are Very Busy, busier than you wanted to be. You can Raise your rates 5% and see if any "keeper" customers drop out. Those that stay are your target for ongoing work, anyway. Remember: If you accept work with others not willing to pay reasonable rates, they are taking the time you could have spent working for those willing to pay Real Money.

Highlighted
Level 7

Member Question: How Do You Set Prices for Your Product?

Wow @qbteachmt. You just taught me a whole economics class in one post. :smileyhappy: This is such a realistic and long term approach to figure things out and a wonderful reminder that our business is a marathon, not a sprint so we have plenty of time to figure things out. What I love about being a small business owner, among many things, is that I am never done learning! 

Need to get in touch?

Contact us