Pricing Yourself to Get and Stay In Business

Written by Elena Fawkner


Continued from page 1

RELATIONSHIP BETWEEN PRICES AND PROFITS

The easiest way to increase your profit is to raise your prices. But you canít just raise prices indiscriminately. Look for ways to manipulate niche pricing instead. This means looking for specific areas of your business where you have some latitude to increase prices.

The way to do this is to identifyrepparttar areas whererepparttar 117506 perceived value of what you are offering is higher thanrepparttar 117507 price you are currently charging. Start by carrying out a competitive analysis of your business. Find out how your product compares with your competitorsí onrepparttar 117508 basis not only of price but costs as well.

If you are going to source this information by approaching competitors directly, a word of caution ... DONíT. The Sherman Act inrepparttar 117509 US (and similar legislation in many other jurisdictions) prohibits businesses of any size from entering ďcontracts, combinations or conspiraciesĒ in restraint of trade. In other words, itís illegal to make deals with competitors about what price youíll charge or what services youíll offer. Merely discussing prices with competitors can be construed as an attempt to conspire on prices. This is one area where you just don't want to give evenrepparttar 117510 *whiff* of an impression of doing anything ofrepparttar 117511 sort.

So, be circumspect in your research. Never discuss prices with competitors and avoid frequent communications with them at all if possible. Instead, to keep tabs on what your competition is up to, read their ads, talk to their suppliers, engage mystery shoppers or send an employee to make observations.

Once you have completed your competitive intelligence, analyze your competitive advantages and disadvantages. If, as a result of your analysis, you learn than you have an advantage over your competition because your business is website design and you know how to do cgi-scripting but your competition has to outsource this function and this means a delay of one to two weeks, then this advantage is something your customers will likely pay more for. Adjust your prices accordingly.

WHEN YOU'RE THE PRODUCT

Some businesses donít offer tangible products at all. Sometimes, YOU arerepparttar 117512 product. So, how do you price yourself if youíre, say, an ecommerce consultant and your business is assisting brick and mortar businesses makerepparttar 117513 transition to ecommerce?

One perfectly reasonable approach is to start with a calculation of your actual expenses and your salary needs and then dividerepparttar 117514 total by a reasonable estimate of billable hours. An article entitled "Setting Fees" by David Dukoff gives a good overview of how to go about doing this.

Letís say your expenses and salary needs mean that your business needs to be generating $100,000 a year. Letís also say you prefer to charge clients byrepparttar 117515 hour rather than by quoting on projects. How much do you need to charge per billable hour to generate $100,000 per year?

Dukoff usesrepparttar 117516 following approach. To start with, how many billable hours do you have? Letís start with 2,080 work hours in a year. Deduct 100 hours for vacation time (2 weeks), a further 80 hours for popular holidays, 40 hours personal time and sick leave and 20-40% of time for marketing and administration. This leaves you with around 1,000 billable hours in a year. You therefore need to charge $100 per billable hour to achieve your goal of $100,000 income.

OTHER PRICING STRATEGIES

Other pricing strategies to include in your structure include discounts to encourage prompt payment or quantity purchases, seasonality issues (for example, end of season ďsalesĒ), offering senior citizen and student discounts and other promotional incentives.

As you can see, settingrepparttar 117517 "right" price for your products and services is absolutely crucial torepparttar 117518 profitability (read survival) of your business inrepparttar 117519 longer term. But with careful analysis and a methodical approach, you should be able to arrive at reasonable pricepoints without too much difficulty. Then it's just a matter of monitoring demand in response to price changes to settle onrepparttar 117520 optimum pricing for your business.

But don't rest there. Your prices operate within a constantly changing environment and you need to be ever-vigilant to ensure that your prices remain at their competitive maxima.

One final piece of advice: if in doubt, price high rather than low. It is much easier to discount prices than it is to increase them.

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** Reprinting of this article is welcome! ** This article may be freely reproduced provided that: (1) you includerepparttar 117521 following resource box; and (2) you only mail to a 100% opt-in list.

Here'srepparttar 117522 resource box to use if reprinting this article:

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Elena Fawkner is editor of A Home-Based Business Online ... practical business ideas, opportunities and solutions forrepparttar 117523 work-from-home entrepreneur. http://www.ahbbo.com



Elena Fawkner is editor of A Home-Based Business Online ... practical business ideas, opportunities and solutions for the work-from-home entrepreneur. http://www.ahbbo.com




Go With The Flow To Succeed!

Written by BB Lee


Continued from page 1

Trust your own instincts. Do your own market research and strategies. Find outrepparttar best plan for your type of home or Internet business. Then GO WITH THE FLOW.

A few entrepreneurs learned early on to keep going withrepparttar 117505 flow and steering clear of undertows. Knowing they will eventually be rewarded forrepparttar 117506 amount of effort they put into their venture.

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BB Lee is Editor/Publisher of SmallBizBits FREE Home business Newsletter. You can visit at http://www.angelfire.com/zine/smallbiz. Limited time! FREE ad to new subscribers! Subscribe at...mailto:Smallbiz-subscribe@topica.com ------------------------------------------------------------------

BB Lee is the Editor and Publisher of SmallBizBits Newsletter. Your Online Home Business Connection.


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