One of the questions that I am asked on a regular basis is “How do I cost myself/product/service”?
To be quite honest, the first time I heard the question I was quite surprised until I understood the ‘why’ of the question that was asked.
You see there are several issues that need to be taken into account when working out your pricing in order to ensure that you are able to cover your overheads, productions, distribution, labour costs and marketing costs. Don’t forgot though, that you also want to make a profit too and this also needs to be factored into your calculations.
Your goals and how much you want to make also has a huge impact on the pricing strategy, so that is something else that you need to be really clear about.
As usual, research needs to be done. You need to check out consumer demands which will also affect the end pricing.
Also, have a look at your competition. What they are selling their product or services for. Don’t go too low because people may think that your product or service is inferior and don’t go too high or you will price yourself right out of the market. Rather make yourself competitive and make your service the deciding factor.
For many though, at first you will probably be guessing at what your costs will be – don’t let this deter you, but do try and be as realistic as possible.
As your business grows and stabilizes you will be able to ascertain what your exact or real costs are and will then be able to adjust your pricing accordingly.
Take care with your margins though as getting that particular formula wrong could have long lasting effects on your business.
Find the correct formula, document it and stick with it and you will be on the right road to success.