As a business owner, you have a lot to consider in terms of how you sell your product or service, hiring, location, and then of course pricing. Pricing your product or service competitively and strategically not only ensures that you can cover your costs but also allow you to build cash flow and reserves.
Pricing, directly and indirectly, influences the other aspects of your business from profit margins and sales volumes to market share. Here are 3 basic principles that business owners need to consider before setting firm prices:
✅ Don't let price be your only competitive factor.
The lowest price is not always the most competitive price and if you are selling specialist products or services, the lowest price might position you as ‘cheap’.
✅ Understand the actual cost of your product.
The cost of sales is not the only cost that you should consider when pricing - time and efforts also come at a cost that you should consider.
✅Understand your market. Its crucial for you to know the market conditions and how much your customer is willing to pay for the product or service even if the market conditions change. For example during COVID, the market conditions around PPE changed significantly as compared to 3 years prior.
Time spent understanding the market, your product and your cost to provide the product the service is the most important part of your sustainability plan as a small business. Good pricing allows you to steadily grow your cashflow and scale.
We provide business advisory services to help business owners increase their cashflow and profits on a monthly basis.
Dispersive Consulting is an accounting, tax and advisory firm whose mission is to help business owners operate profitable businesses and gain a better understanding of their business finances. Good financial management empowers business owners to make smarter, more informed decisions about their businesses.
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