Pricing

Pricing Strategy (Image and price consideration)

• How will the price of your products compare to competitors?
• Will you be looking to maintain margins or looking to sell
• Do you want to be perceived as a discounter or a high-end business emphasising quality and service?

Pricing and Margins (include a price list)

To establish a price for your proposed product or service the following items have to be established;

• Is there any competition, if so what is the competition doing?
• What is the market supply and demand?
• What image will your product or service project?
• What is your cost of goods sold?
• What is your overhead cost (day to day costs)?
• What is the minimum you will work for? Assign this wage to the applicable area; either cost of goods sold, overhead or both.
• How much profit will you want? Your Business requires profit for:
  1. Building your cash reserves for increased working capital.
  2. Building your cash reserves for periods of slow sales.
  3. Providing cash for business expansion.
  4. Giving you an income over and above the minimum you will work for.
• To find out the end price of your product you must figure out what the competition charges for a similar product and, if there isn't any competition, what the market will bear.
• Then you must establish if you can sell the product for this price while covering your costs and overhead and generate a reasonable profit.
• To establish your costs and overhead you need to determine the cost of goods sold plus establish what cost to assign to your own labour. This should be the minimum amount you will accept.
• The profit should include an additional amount for yourself plus an amount for the expansion of your business and additional money required for working capital. Example: $20 -Cost of the item sold $5.50 -Overhead costs assigned to this item $1.50 -Your labour costs per item $6.00 -Profit per item ($2.00 per item for you, $4.00 for your company) $33.00 -Total sale price
• If the $33.00 sale price is competitive, the $6.00 profit is adequate and you are providing extra value over the competition in areas such as better service etc . . . a reasonable market share is obtainable.