Starting a new business is so exciting. The business owner has so much to share with their potential customers they’re practically bubbling over. But they’re also a little scared and those little voices in their head makes them wonder if they’re giving enough value for what they’re charging.
“What if I’m charging too much?”
“What if they buy and don’t think it’s worth the price?”
“I’m new at this, I probably shouldn’t charge as much as the experts.”
Many people start off offering products or their time for free. It helps them work out the kinks and it’s a lot less scary (customers can’t ask for their money back if it’s free). It might also help build somewhat of a customer base.
Others underprice themselves again and again and don’t even realize it. How much time does it take them to create the product, how much $$ in supplies, how much $S in expenses? What is their profit margin? These are hard numbers and they need to be figured out and assessed before putting a price on the product(s).
Many new businesses tend to price products according to the standards in their industry. They don’t do the math and instead figure others have done it for them, so they price themselves right in the middle. But one company’s expenses and supplies and time can be vastly different from another’s, especially when one is a sole proprietorship and the other is a corporation.
Another thing to look at is how a business wants to position itself with the consumer. A low pricing strategy can backfire as it can make the product seem cheap and inferior. Pricing on the high end can give the image of a well-made product and great service. The higher end pricing may mean fewer sales though.
So how should a business raise their rates once they’ve figured out they’re not paying themselves properly or paying all expenses or making a profit? There are several ways they can go about it. They can raise them incrementally – perhaps quarterly or yearly. They can raise them for new customers first. This works well for services or coaching. They can raise the rates for existing clients on a specified future date with advance warning. New products just coming out can be given a higher price and the older ones retired. Also, business owners can even reinvent their brand with higher rates and get a new customer base.
If you find you’ve priced your products or services too low, question yourself as to whether you’re proud of your business and what you offer. If so, charge what your services and products are worth and concentrate your time marketing your new properly-priced business.