How do you go about pricing your products and services? It’s been said that if customers are the heart of your business, then income streams are the arteries. The easy formula to pricing is this:
Profit + Expenses = Price
In other words, you must consider what it will cost you to produce your product or service, determine what you need to make in profit after expenses, and that will determine your price.
This unfortunately is not how many small businesses create their pricing, and their lack of cash flow is evidence. The most likely reason you undercharge for products and services is fear and insecurity. You fear that customers will consider your prices too high and go somewhere else. You are insecure about the value you offer and don’t believe you deserve to make a profit. If either of these issues is true, go back to the March 20 post on Value Proposition and work through the questions there until you are clear that you have proof that you offer a true value, in demand, that only you can provide.
What are your customers willing to pay for your offer? What are they currently paying? How are they currently paying? How would they prefer to pay? What other income streams (additional products or services) are they willing to pay for? Bottom line: ask them! Survey your customers to find out the answer to these questions and you will be able to creatively price your products and services in a way that is more attractive to customers.
Struggling with pricing your products or creating revenue streams that create profitability? Contact me for a complimentary strategy session and a free template at firstname.lastname@example.org.