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One of the hardest things to do in business is coming up with pricing for your services or products. You want to make money; however, you do not want to make it too expensive, no one will buy it. There is a happy medium where you are making a decent profit margin and selling services or products regularly. The journey is getting to this point, and it might not be as complicated as you would think.
Here are some ways to tell if your prices are too low or high.
- 0 or negative profit margin
If you are not making money or losing money on your service or product, it is an obvious indication you need to raise your prices. This information should be calculated in your business plan before you even consider doing business. Believe it or not some business owners do not understand this concept and wonder why they are not successful. This issue is common when a product is created using multiple ingredients and the business owner doesn’t price everything thing out to figure out an accurate profit margin.
- An influx of customers
Another indication your price may be too low is an influx of customers. You are growing faster than you can handle and your customers are more than willing to spend the money on your product or service. At this time, you should consider raising your prices slowly until you reach the perfect price. There is a risk in losing customers, however, those customers are not seeing the value you or your product brings. In turn you will start learning who your loyal customers are. As long as, you do not become greedy you will find the perfect profit margin.
- You have a very little customer base and complaints about pricing
A small customer base and constant complaints is an indicator that your prices maybe a little too high. The first step would be to check your competitors pricing. The second step would be to check competitors’ quality of work. If you have a better quality item you can make it more expensive, however you do not want to be the most expensive business in the area. Most people will spend more for better quality, but only to a certain extent. It doesn’t matter how good the quality if you are twice as much as everyone else in the area.
Hopefully, these pricing tips and tricks will help you have the perfect profit margin and help you be more competitive. Your business plan should help you figure out what the competitors are charging and what you should be charging to keep ahead of the competition.