Creating an effective pricing model for your business is one of the most important tasks you face as a business owner. If you properly price your goods and services, you will enjoy a healthy profit margin while attracting new and repeat customers. But if you miss the mark on your pricing, your business is apt to struggle to remain afloat. Below are three tips to help you build an effective pricing model for your business.
Keep Your Break-Even Point In Mind
The path to proper pricing begins by calculating your break-even point – the amount of money you need to generate through your sales to cover the cost of your products and other expenses. Ideally, your prices should comfortably cover your operating expenses while yielding a profit margin that will fuel your business growth.
Research Your Competitors
As you develop your pricing model, make sure you do your research on competing companies that offer similar goods and services. If their prices are higher, investigate any additional services they might be bringing to the table to drive more revenue. If they advertise lower prices, look into what might be the root of their competitive advantage. Researching your competition may hold the key to re-evaluating your own pricing model.
Always Strive to Deliver Value
As prospects compare your company with your competitors, they will ultimately choose the company they feel offer the greatest value for their investment. Instead of looking at this as a challenge to overcome, consider it as your time to shine! If your prices are higher than your competitors, but you offer something they do not, don’t be afraid to highlight that added value during your sales process. It may be the final push you need to convert that prospect into a new client.
Remember that Knowledge is Part of Your Service
Sometimes the desire to generate fast sales can cause business owners to undervalue their knowledge and capabilities. Avoid this pitfall – your knowledge is just as much a part of your service as any other factor, and you should be pricing according to your level of expertise. Many business owners fail to consider their professional knowledge as an asset; it may be intangible, but customers don’t see it that way – they want to put their faith in the hands of an expert. Let your proficiency set you apart from the competition, and don’t undersell your professional experience.
For more tips to help you deliver proper pricing, we invite you to contact us at MD Andersen, CPA, PA. We look forward to hearing from you!