Are you charging enough money for your products or services, or are you giving them away?
As an accountant I see this often: A belief that you have to compete on price. Whether products or services; a lot of business owners try to have the lowest price, believing that it will sell out fast, and give them the advantage over their competition.
If you have a service business, you may be forgiven for thinking that there are many other professionals out there who offer the same thing, otherwise if you have a product or products, that there are many similar products out there.
This is why you need a USP (Unique Selling Point) that differentiates you from all the other service providers or shops that sell your product or service. Look at what you offer. Look at the value of your skills, experience and knowledge that go with what you offer. Build value by giving away something with your product that doesn’t cost you much. Whatever you do, make sure you look at the value of what you offer, what it cost you, and what your profit margin is.
Making sure your product or service has the right price can make or break any business whether new or old.
Start-ups need to make sure they are competitive and still make money while older companies need to make sure their customers pay for any increased costs they may incur in obtaining the product or delivering the service they sell. If you don’t raise your prices every year, you may be giving your product or service away for free.
Here are three steps to making sure you make a profit:
- Work out the costs involved in making or obtaining a product or delivering a service. Think about wages you need to pay, other overhead costs like machinery, ingredients or materials, and anything else that may affect what you sell.
- Work out how to allocate these costs; if you only sell one thing, it is easy. However, if you sell a lot of different goods or services, this might take some planning. Common allocations will involve labour or machine hours.
- Ask yourself the big question: how much of a profit margin do I want, and will the market be willing to pay that price?
You need to have a vision and a mission in life. You need to set goals and aim to achieve them and you need to know how much money you need to achieve your goals. If you reject a fair exchange how will you ever be able to achieve your greatest ambition?