Tina started her career as a tax accountant and as she moved through her career to a tax manager she realized that many businesses needed help with prices, budgets and cash flow. 4 years ago Tina decided to start her own business in which she has helped companies with these needs.
We were lucky enough to have Tina stop by to give us 8 tips/steps to determine how to set your pricing.
8 Steps to Set Your Pricing
1. Have a Strategic Pricing Plan. When you are offering what your target audience wants it gives you the confidence to charge what it is worth. You would first dream a little bit about where your business would be: Small business or big business?
2. Identify and Measure the Value that You Provide. You do not want to have a price war. Think about the ways that you are different. Think about how you can increase your value so you can increase the price. Stop looking at the competitors and look at your value.
3. Calculate Your True Cost. Think through every single expense that you have. There are two different types of costs.
Fixed costs: Really easily to estimate. These are your routine, once of month expenses, for example, your telephone bill, your payroll, etc.
Variable costs: Little bit harder to estimate because these sometimes fluctuate with your sells volume.
You need to understand how much it costs you to run your business to make sure you are charging enough.
4. Pick a Price Model. The two most common price models are Cost Plus and Value Based.
Cost Plus: Take all of your costs from step 3 and add your cost for time.
Value Based Pricing: You would really maximize step 2 with this model. This helps you price for not only your time but for your value as well.
5. Set Your Price. You can use the Cost Plus model as a good baseline and then add in your value.
6. Create Packages. Have a minimum price as a basic level, then a medium level, and lastly a premium. This allows your customers to shop within the walls of your business.
7. Reality Check. Look back on your prices and does your experience and reputation really justify the price? You may not be able to charge as much as you want to charge at first.
8. Practice and Experiment. You have to be willing to test the market. Listen to people’s feedback. Do not set it and then forget it. Practice with yourself, if you do not believe the price, others won’t either.
More About Tina: Tina White, CPA is the owner of Panoramic Business Solutions. She is a number crazy, profit finding accountant. She helps business owners enjoy the panoramic view of their finances and business. She can help your business grow with a customized pricing strategy, technology tips to shorten your learning curve, and a proven system to improve efficiency. Learn more at www.PanoramicBusinessSolutions.com.
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