A lot of things matter when you start a new business. Your product idea, for example, is a pretty crucial factor. Even the team you choose to have around you has significant standing on how far you manage to take this thing. In the grand scheme of things, though, little is more essential than your price points.
Let’s face it; you aren’t going to pull a profit if you don’t think long and hard about the amount you charge. Charge too much, and there’s no chance of people buying what you offer. Charge too little and you’ll soon find yourself facing financial hardship when you can’t make your money back. It’s a minefield of potential disaster, and it’s one you need to tread carefully to stop your company from imploding.
Lucky for you, there are a few flags to warn you of problem areas along the way. You didn’t think we would leave you facing destruction without that much, did you? All you need to do is keep reading to find out what they are, and how you can avoid them.
Misunderstanding the cost of manufacturing
If you want to kill your profits, this is the way to do it. A good business manager will always have a firm grasp on how much it costs to make their products. That’s basic business sense, isn’t it? Production costs are the foundations on which any price point is decided. Get this wrong, and you’ll soon find yourself spending more than you earn. There’s no chance of ever making a go of things if that happens. Make sure it doesn’t by getting a firm grasp on this from day one. Remember, too, that estimates are no good here. You need to know exactly how much you’re spending on things like materials and even manufacturing itself. If you’re able, it may also be worth bringing in an outside company for this. As you can see if you read more about services like these, expert accountants are well versed in achieving accurate values. That would reduce any risk of undervaluing your products. All without any extra effort on your part. If you aren’t able to outsource this yet, though, it’s past time you got out that calculator and started working this thing out. Only then can you even develop a slight idea of how much you should charge.
Charging more than your competitors
Oh yes. A good old bit of business competition. The chances are that you know all about finding a niche market. If not, you wouldn’t have gotten this far. But, even the most seemingly unique product out there is sure to be in the same category as something else. This is a saturated market you’re working in, after all, and no product is an island. With that in mind, you need to find your competitors and research their price points. No one is going to buy your products if this other company offers a better deal. Don’t let it happen. By checking these things before announcing your price, you can take this into consideration. Bear in mind that this issue isn’t as simple as down pricing every other product going. That’ll soon lead you to stumble into at least one of the problems later on. But, you do need to consider whether your product is value for money compared to others. If you’re charging more, is it because you offer your customers something extra? As long as you can justify the price, the chances are that you can win your customers around. If you do have to charge more, it’s worth sticking as close to competitor prices as you can without losing money. That way, you can offer extras they don’t for almost the same price. Who could resist an offer like that?
Not taking time to know your audience
Not knowing your product audience is a mistake for more than just your pricing. Failing to understand who would buy your product could see you failing to sell it at all. It could also see you struggling to hit the mark price-wise. The fact is that every audience out there will have different approaches to their money. While you can’t predict how much your customers earn, you can develop some idea of how much they would be willing to spend. If your product appeals to a young audience, for example, you know that they won’t be willing or able to spend a fortune. An older audience, however, may have more disposable income. All you need to do, then, is know which side of that coin you fall on. This isn’t half as tricky as it sounds. Considering what your product offers should get you halfway there. Equally, a simple bit of market research will help you develop an idea of this. By putting website analytics in place, you can see the age range, nationality, and even the gender of your visitors. By checking these on a regular basis, you should see some patterns starting to emerge. Then, you can consider cost in a far more informed manner.
An unwillingness to change
An unwillingness to change prices is another nail in that business coffin. The fact is that few prices remain fixed at one steady rate for all time. That’s not the way to do business. Your prices should both rise and fall according to the market at the time. If your competitors all drop their rates, you may need to do the same. Equally, you’ll need to raise your prices if your manufacturer raises theirs. Even your audience may earn more depending on yearly pay rises. Price points are never still for long, and you need to keep up with their movements. As a general rule, you may find it worthwhile to evaluate here on a quarterly basis. That way, you can make sure that your prices are never behind the times. And, guess what that means? You can always pull the profit you need to cross that minefield safely!