- Don't forget to factor in your own time
It’s a common mistake for businesses to count the costs of raw materials/stock but not think about the hours they will spend on it and therefore under-price their product. Work out an hourly rate that you’re happy with, and calculate that by the number of hours you’ll spend to give you a cost to add on to your cost spreadsheet. Your time is valuable so make sure it’s a key part of your pricing decision. - Think about your break-even point – that is the point when income = expenditure
You need to go beyond that to make a profit, and need to understand the costs you’ll incur so the product/service can be priced appropriately. If you’re unsure what costs to include, have a look at our ‘8 tips to work out start-up costs’ guide here.
- Research the competition
Look around to see what your competitors are charging for a similar product/service and come in roughly the same unless you’re offering a significantly better offering. If what you’re offering is new, try and find broadly similar products/services and cost based on that. Considering demand as well as knowing the size of your target market can help you assess how high the demand might be. If you’re not sure of the size of your target market or who your competitors are, have a look at the Business Gateway market reports here or commission a free report via our research service here.
- Cheaper is not always better
It’s not good idea to undercut your competitors as your potential customers might perceive your product/service is not as good quality as your competition and that may do more harm than good in the long-run. It may be tempting – especially at the start to get customers through the door. However, if you adopt this approach, there will come a day when you have to put your prices up, and customers don’t appreciate that – they’ll vote with their feet. - Offer special offers as part of your launch campaign
It can be a good idea to offer special deals for first time customers where they’ll get discount or if they recommend you to others, they’ll get a discount. This is a way of building up your customer base but make sure it’s obvious that it’s a special offer discount as you’re starting up. If you have a service, you can offer a free taster session, again as a way of attracting new customers but always make sure they know it’s a one-time offer.
- Be transparent
Customers don’t like surprises. If it’s appropriate, put your prices online so they can see exactly what they’ll be paying for. If you get your costs wrong and need to adjust them, explain why the price as changed and the rationale behind it. Customers will understand if they know why something has changed.
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