Deciding to open your own business is a risky, yet exciting, venture. One of the most important factors to consider is how to price your services so that you can make a profit. Customers come to National Business Capital for help achieving their business financial success, whether through funding or merchant services, so we would like to offer the following tips on setting price points.
Many business owners feel they should undercut their competition when first starting out. Discounts may be given to family members, friends, neighbors, or anyone to bring in business. This may seem like a good way to start, but there are a few problems it can create. First, can the business sustain itself on this reduced pricing? The business may be busy with work, possibly even overloaded, but still be unable to cover costs. Second, pricing affects the perceived value of your services. Set your price too low and potential customers may question the quality of your work or the need for the particular service you provide.
Raising the price of services often causes concern for business owners as they feel customers may be upset or not feel the need to continue the service at the higher price point. Confidence is key here. The business was created because there is a demand for the services provided and the business produces quality work. Communicate with your customers to be sure they have a full understanding of the full value your business provides. Highlight the areas where you go above and beyond your competitors. Higher prices means the business can sustain itself on fewer customers or with added employees. Either way, staff will have more time to spend with each client therefore providing greater service. The higher price point may also help attract the right customers, meaning the customers who understand the value of your business and the value of paying for quality products.
Take a look at the cost to you for providing the service and then determine a fair profit margin. Customers understand that a profit needs to be made and will not begrudge a fair one, but may walk away from a business with a reputation for overcharging.
Research the industry. Find out what competitors are charging. Review annual statement studies on small and mid-sized business financial benchmarks and be sure your profit margin is in the ballpark. Overall, have confidence in yourself and your business and the value you place on it.