Setting the right price can be the single most important step and entrepreneur takes.
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Prices that are too low may bring in plenty of business but still leave the entrepreneur short. An entrepreneur that overprices either materials or services may end up getting priced right out of the market.
It may not be easy to find the magic balance for pricing as an entrepreneur. Reviewing the market and looking at income needs can be the first steps to unlocking that magic price.
Market Value – what are the prices that currently exist in the industry? Review those prices and also make notes of the amount of time a business has been in the market. Experience gives entrepreneurs the ability to charge more than those first venturing into the industry.
Hourly Wage – What would be the hourly income an entrepreneur would need to make working for someone else? This hourly wage can be determined by figuring up the current (and expected) expenses and dividing by the number of hours an entrepreneur will be in a position to dedicate to work.
Strengths – What are the extras that the entrepreneur can bring to the table? Additional experience or education in the field are just some of the examples that could increase the value of the entrepreneur.
Weaknesses – What are any negatives that might affect the entrepreneur? Location can be a depreciating factor for entrepreneurs. The amount that an entrepreneur receives in a small, rural town may not reach the levels of that same entrepreneur in a large city.
Goods and Services – What will be provided for the price that will be paid? The more that can be included into the package then the more the package will be worth. A writer that can edit and publish materials will be more valuable to a customer then just a content writer.
Discounts – Will there be discounts for repeat customers, bulk purchases or other transactions? Knowing what discounts will be offered can help with setting the pay scale for all products or services so that there will always be a profit margin.
Even after all of the different components are factored, asking for a price can be difficult for many entrepreneurs. It can be particularly difficult for those entrepreneurs that are selling services as opposed to goods. Putting a monetary value on personal skills and abilities can be scary an overwhelming.
Setting prices for an entrepreneur may take the guidance of an advisor or mentor. Entrepreneurs that are uncomfortable with the pricing situation should consider looking to an outside source for assistance to review the products and evaluate the reality of the market to determine a value.
Prices also need to be reviewed on a regular basis. Any contracts that are signed should stipulate that increases may be necessary when there is a change in the market or to simply to adjust for inflation.