Sunday, September 5, 2010

How do you arrive at the right price for your product or service?

I was just asked by a business associate, how did I went about arriving at pricing for my services and I explained to him that I started out many years with a figure based on my experience and a few calls...but as the years went by I raised my price to it's current level.  The per hour rate I charge is not based on my overhead but more on the type of service I provide plus a bit of a premium that helps offset other miscellaneous costs.  It's not very scientific but again, it's an evolving factor in my service business.  I am selling a personal business specialist that can help you manage your personal finances or your small business issues.

Now that sounds good, in theory, but as all of us business owners doesn't matter how good it sounds to us if no one is willing to pay for our product or service.  That's where the cold hard facts of reality set in.  No matter how talented you are or how educated you are, the customer you are seeking is still only going to pay what they think your product or service is worth.  Now more than ever, customers are shopping.  They may be willing to pay a little more in some instances but usually they need to be convinced of the 'value add' you are bringing to the table that will justify the premium they will be paying.  So we all need to do our homework when it comes to setting the price point that gets the job or sells the product.  It's part of the job that we all struggle with and trusting your gut might work but there needs to be a little more involved if you're going to get it right and build your business.

Norm Brodsky who is an entrepreneur and writer for INC. Magazine shared some good advice in his column when someone asked him the question, how do you set the price for your product or service.  Solving-the-pricing-riddle?   Hope it gets you thinking and working on finding the right formula that will work for you.

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