12 Considerations When Creating Your Business’s Pricing Structure

12 Considerations When Creating Your Business’s Pricing Structure https://ift.tt/3mtHazB

Business’s Pricing Structure

Prices can make or break a business, and deciding what to charge for a particular good or service can depend on a lot of variables. Finding the “sweet spot” for your pricing takes a bit of market research and a lot of trial and error, especially for new entrepreneurs. Sometimes your approach to pricing structure can even change over time, evolving to account for further information you may learn in your journey as a business owner. That’s why we asked 12 entrepreneurs from Young Entrepreneur Council (YEC) the following:

“What’s one consideration you make when deciding on the pricing structure (and actual price) for your product or service, and how has it changed from when you just started out?”

Here’s what YEC community members had to say.

1. Per-Unit Costs

“When I started out, I’d take a look at my competition and ballpark my pricing structure from there. Nowadays, I crunch the numbers. I look at the per-unit cost of each product and think about what a sustainable margin looks like for me. This will inform me of whether I’m spending too much on making the product and need to switch suppliers, or whether I have to start targeting an upmarket demographic.” ~ Tyler Gallagher, Regal Assets

2. Customer Feedback

“Interview your customers to understand their needs. Business owners are inclined to determine the price based on their feelings. The problem is that your product or service is your baby, and sometimes you won’t see it clearly. Ask your customers and find the balance between your business needs and their ability to actually buy it. Don’t be afraid of asking. People love to share.” ~ Riccardo Conte, Virtus Flow

3. The Product’s Market Position

“You have to look at the market currently and think about where you want to position the product. Are you competing on a unique value that you can charge for? Are you a commodity and need to go cheaper? Or do you have a great brand and excellent value and can anchor your price high? There are lots of factors in that decision, but remember you can always start low and go higher.” ~ Nicole Munoz, Nicole Munoz Consulting, Inc.

4. The Value You Bring

“Our pricing structure is based on the value we’re bringing to the table. When you’re determining the asking price, you have to keep the market, your customers and other factors in mind. But the value you choose should accurately reflect the quality of your product or service.” ~ John Turner, SeedProd LLC

5. Project Management

“Most business owners, especially in the service industries, tend to price their offerings too low when they start out, which really traps them in a never-ending feast-or-famine cycle. One of the most useful things I learned is to always budget for project management (unexpected fires you have to put out). My advice: If you have happy clients at the rates you’re charging, add 25% on top.” ~ Han-Gwon Lung, Tailored Ink

6. Your Customers’ Perception

“You can use many criteria when pricing, such as the time and cost you put into it and what your competitors are charging. I think another crucial element is your customers’ perception. This is especially important in a service-based business. You may need to educate your customers about the actual value. Until then, it can help to offer a free trial or a low-cost introductory plan.” ~ Kalin Kassabov, ProTexting

7. The Scope of Work

“Deciding our pricing structure is actually the most constantly evolving portion of our business. We provide a service that is often personal. We are responsible for a client or brand’s image and exposure in the media. When deciding cost, we take many factors into consideration: scope of work, hours and staff allocated, client’s temperament, commitment length and the current economic climate.” ~ Jennifer Buonantony, Press Pass LA and PPLA Social + PR

8. Accessibility and Quality

“In addition to taking into account the investment and production process of that product or service, it is necessary to consider elements such as competition and the accessibility that people may have to your product or service, especially if you are starting up and want to scale your business. Quality and accessibility are two things that will attract customers.” ~ Kevin Leyes, Leyes Media

9. Flexibility

“Always offer plans and options. Clients like to feel like they are in control of the decision. By offering options, plans and various deals, they feel like they are in control and you have a chance to sell more when someone is already in the process of buying from you. You gain nothing from inflexible pricing.” ~ Matthew Capala, Alphametic

10. Your Hourly Rate

“Understand your hourly rate, even if you are charging a flat fee. When starting, it can be difficult to gauge how long a project or service will take, and charging a flat fee may result in a low rate if not predicted appropriately. It took a little trial and error, but I was able to hone in on a pricing structure that fit the client’s budget while adequately honoring my time and expertise.” ~ Matthew Podolsky, Florida Law Advisers, P.A.

11. Your Competitors

“When choosing pricing, I like to look at my competitors and see what they’re doing and how customers feel about it. The great thing about our products and services is that we have pricing plans so our customers can choose the best option for them. This helped our company increase sales by providing more options and appeasing more people who came across our product.” ~ Stephanie Wells, Formidable Forms

12. A Subscription Model

“Our products need a great deal of support and have to evolve as the ecosystem they rely on grows. A one-time purchase may seem attractive to customers, but it makes it impossible to provide them with support and updates over time. This is why we offer a subscription model. It enables us to keep our products at the top of their space and to help customers with their needs too.” ~ Syed Balkhi, WPBeginner

Image: Depositphotos.com

This article, "12 Considerations When Creating Your Business’s Pricing Structure" was first published on Small Business Trends

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