By Joleen Small
You have a product or service you want to sell. Of course, you want to sell it at the right price. Here are a few things you should know to get your pricing right.
Conduct a competitive analysis
Conducting ongoing targeted research in your market is extremely important. Research your competitors to find out the range of prices they charge for a similar product or service. Also, research potential customers to see what they actually want and what they are willing to pay. Many entrepreneurs think they know what their clients want, but you have no idea until you ask.
Include everything that you paid in costs in your pricing
Many entrepreneurs believe pricing means purchasing an item and charging slightly more for it. That is not pricing. Pricing means assessing all the costs involved in producing that item from overhead to marketing to the rate of individual parts and including them in your final price tag.
Know your margins
Are you charging enough to cover any hikes in supplier prices or overhead? Don't price your goods so stringently that you can't cover any reasonably anticipated rises in costs. You may not be able to pass on those additional expenses to your customers, even though you may want to do so.
Have more than one supplier
If we learned anything from the supply chain debacle at the ports in California, we know your supplies can be disrupted at any time, and you'll need a way to quickly access them. If you can't contact your primary supplier, you need to have another on deck to acquire your needed items. This can help maintain your prices because they won't fluctuate with the availability of your supplies. You also don't want to be dependent on one supplier whose prices may increase without knowing the prices of other suppliers who sell similar items.
Manufacturing abroad is not always cheaper
Most entrepreneurs want to get the lowest price on any item associated with their business, but cheaper is not always better. This also applies to foreign manufacturing. Manufacturing abroad is fine if you have a large number of items to produce, but most start-ups aren't that big of an operation, yet. The best way to go about this is to manufacture domestically for at least ten years of operation. After that period, you may then evaluate if you are large enough that it's cost-effective to manufacture your goods overseas.
If you want to learn more about pricing for your business, SCORE Westchester has a webinar for that. Click here to view "Understanding Pricing, Costs, and Margins for Your Small Business" presented by two SCORE Westchester mentors, Nina Joan Mattikow and Arnie Sternheim.