Best Practices

Loudoun SourceLink: Are You Charging Enough for Your Product or Service?

Published Jul 06, 2015 by SourceLink Administrator

by: Lois Kirkpatrick

One of the biggest mistakes small business owners feesmake is not charging enough for what they sell. Too many entrepreneurs use simple math to figure out how much to charge for their product or service. They decide to compete on price by charging as little as they can get away with and still pay their bills. They think that offering the cheapest price will win them more customers.

That's not a sustainable strategy for the long run. It's basically telling customers that there's nothing special about what you're selling.

It's better to figure out how much your ideal customer would pay for the specific benefit you sell. For example, if your product saves time, think about how much your ideal customer would pay for more free time. He or she might pay 10 times what you're charging just to have more R&R.

You could also set your price to match – or exceed – your customers' discretionary spending. Let's say research shows that your clients strive to do more, be more and have more. They're reaching up. Making your service more expensive than its competition sends the message that it's higher quality and more valuable. If you make your product feel like an achievement, achievers will pay more for it.

Just remember that if you do charge more, everything about your business has to support the message about your product's quality. That means your packaging, your website, your office, and even your business cards have to look as upscale as your price implies. Work with experienced designers and other professionals who will help make the price you charge look justified.

And be willing to pay more for their services.

Photo: copyright-free clip art

Content contributed by Lois Kirkpatrick of Loudoun SourceLink, a proud affiliate of U.S. SourceLink, America’s largest resource network for entrepreneurs.