The Price Is Right

Do you have trouble figuring out how to price your products or services? Pricing mystifies many small-business owners, as a recent article in Business Week points out. The mistake many small businesses make is looking to the competition to determine what they should charge, instead of basing their prices on material and labor costs—and the value they provide to customers and clients.

Bad pricing decisions can kill growth and profits, but all many business owners need is a shot of self-confidence to show customers why their offerings are different, says Andy Birol, a financial consultant quoted in the story. Other suggestions include:

•Know the value your customers get from using your products or services and articulate that to them. Explain why the competition can't compare.
•Make sure any materials you buy or time you spend on a meeting or sale reflects in your pricing.
•Hire a knowledgable person who can help you track costs and forecast overhead.

If you're interested in learning more, check out our article, "The High Cost of Low Prices," in the Manual section of our August/September issue.