Pricing Yourself to Get and Stay In Business

Written by Elena Fawkner

Pricing Yourself to Get and Stay In Business

© 2002 Elena Fawkner

It goes without saying thatrepparttar bottom line of any successful business is profit. Don’t make a profit and you won’t be in business for very long.

Making a profit is pretty simple really.

You just have to make more than you spend. The trick is to know how much you have to make to exceed what you spend.

And you spend more than money when running a business. You spend something infinitely more valuable. Time. And, as we all know, time is money.

To maximize profits, accurate pricing is absolutely critical. Your prices must be high enough to cover costs and enable you to earn a reasonable return but low enough to remain attractive to prospective clients.

New entrepreneurs often have difficulty accurately pricing repparttar 117506 value of their time and expertise. Some takerepparttar 117507 approach that they can work cheaply because they're fast and they’re prepared to take any work, now matter how low-paying, to fill inrepparttar 117508 time between more lucrative assignments.

For this group,repparttar 117509 mindset appears to be that any work is better than no work. Although this may seem reasonable when you're first starting out and you just want to make your mark as early as possible,repparttar 117510 downside is that this short- sighted approach can create in customers a “cheap” mindset that is difficult to shift oncerepparttar 117511 business becomes established.

Another group of entrepreneurs, though, takesrepparttar 117512 approach fromrepparttar 117513 outset that they are worth top dollar and demand fair pricing forrepparttar 117514 value they provide and won’t accept anything less. This group appears to be more successful thanrepparttar 117515 former inrepparttar 117516 longer run. Sure, they may find it slow to start with. After all, they are new in town, they can't rely on repeat business and they can't riderepparttar 117517 wave of their own impressive reputations. But by settingrepparttar 117518 bar high to start with, when their businesses DO become established, they've setrepparttar 117519 tone and their businesses usually have a firmer foundation for it.

This article looks atrepparttar 117520 fundamentals of pricing forrepparttar 117521 new home-based business entrepreneur.


Here are some basic principles to keep in mind when considering your pricing strategies:

=> Prices must at least cover costs.

If you don't at least cover costs, and this includes an amount for your time, you will incur a loss. If your business is incurring a loss it's a hobby.

=> The best way to lower price is to lower costs

As price equals costs plus profit margin, it's obviously better to reducerepparttar 117522 cost element thanrepparttar 117523 profit element if, for any reason, you find that you must reduce your prices.

=> Prices must reflectrepparttar 117524 environment in which they operate

Any price, whether yours or your competitors', necessarily reflectsrepparttar 117525 dynamics of cost, demand, market changes, competition, product utility, product longevity, maintenance and end use.

=> Prices must be withinrepparttar 117526 range of what customers are prepared to pay

It's all very well havingrepparttar 117527 best bread slicer inrepparttar 117528 western world but if your price is more than customers are prepared to pay for it, so what? Onrepparttar 117529 other hand, there is absolutely no reason to charge less than customers are prepared to pay either.

=> Prices should be set at levels that will shift products and services and not to beat competitors alone

It's easy when you start delving into all ofrepparttar 117530 sophisticated analysis and research around about optimum pricing levels to forget that, atrepparttar 117531 end ofrepparttar 117532 day, you set your prices as high as you can while still shifting your products and services. So don't think that keeping pace with competitors is enough. It isn't. You may have competitive advantages that mean you can charge more than your competitor.

=> The price you set should represent a fair return for your time, talent, risk and investment

Don't be coy about demanding a reward for what you bring torepparttar 117533 table. Your expertise and talent has objective worth. Don't just give it away. Charge for it.


The basic price you will strike is simply your costs plus a profit margin. It follows that before you can set your prices you must know exactly what your costs are. Costs fall into three main areas:

=> Direct Costs

Direct costs are those things directly related torepparttar 117534 creation of your product such as raw materials, parts and supplies.

=> Overheads

Overheads are business costs not directly related to production and include things such as taxes, rent, office supplies and equipment, business related travel, insurance, permits, repair of equipment, utilities (electricity and telephone) and professional advice (accountant, lawyer).

=> Labor

Labor costs include all wages paid to employees *including yourself*. It's amazing how many home-business owners forget to include their time as a cost of business!

Calculate your labor costs by multiplyingrepparttar 117535 number of hours worked by an hourly wage. You should also include fringe benefits (typically 15% plus).

Once you have ascertained your total costs, add a profit margin. A 15-20% profit margin is standard for most home-based businesses. Although you have included your own wages in your labor costs, if you don’t add a profit margin there will be no money for growth or expansion ofrepparttar 117536 business.

Go With The Flow To Succeed!

Written by BB Lee

Go With The Flow To Succeed! by BB Lee (C)2002

"Go With The Flow To Succeed!"

You could easily apply this concept to running an Internet or home based business!

"Sounds like a sink or swim theory?"

Simply stated, "Ifrepparttar way you operate your home business is keeping you afloat. Keep on GOING WITH THE FLOW. Instead of swimming againstrepparttar 117505 tide!"

Why listen to yet another self proclaimed Internet Guru who is running an "Online Biz" showing you his easy way to success. (AN INDIRECT CURRENT FORCING YOU AWAY FROM YOUR TRUE DESTINATION)


You see their ads all overrepparttar 117506 Internet:

"Make Millions Working A Few Hours A Week In Your Pajamas."

"The Easy Way To Online Riches"

"Make Money While You Sleep."

Success Online takes time and tremendous effort. Forget about allrepparttar 117507 so called short cuts to Online Riches. (WHICH ARE DECEPTIVE LITTLE UNDERCURRENTS)

Cont'd on page 2 ==> © 2005
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