Businesses often struggle with how to price our products and services. The goal is to find the sweet spot where our clients believe they're getting a fair price for the quality and other aspects of what they're buying.
The problem often is that, businesses (especially small and micro businesses) will charge whatever they think is the lowest price they can get away with to cover their costs so they don't lose business to the competitor.
What happens with this thought process is that the customer gets an unreasonably low price and the business doesn't get a fair price for their offerings.
Yes, you heard me right...businesses have to charge a price that's not only fair to the customer, but fair to themselves as well.
A fair price for the business is one that will allow them to not just cover costs, but to also cover overhead, taxes, and still turn a profit that's at least enough to sustain the business owner.
Too many times, business owners don't take into consideration the costs of running a business beyond the cost of goods sold and payroll for staff. companies go out of business all the time because they couldn't pay their taxes; or because they thought that charging a few cents/dollars more for a product than it cost them to make/buy was making a profit.
In just this past week, three people told me that they needed a new source because their old one had disappeared. When I reviewed the pricing they were getting for the same item I would be providing them, I had to be clear with them that I couldn't come close to matching those prices and still stay in business. I assured them that our prices are competitive, even if not the rock bottom lowest and that, doing business that way has kept us going for over 20 years.
In all three instances, they chose to pay more (sometimes just a few cents more and once almost 15% more) to have the peace of mind that we'd still be there when they needed to reorder, get new ideas, or just know that they'd be getting good quality products.
So, when setting price, don't be in a race to the bottom because the bottom will probably not be in business in one to three years. All you'll get are price-shopping customers who will gladly abandon you for the next company that's willing to go low on price. Understand that a fair price is one that's fair to both sides of the transaction.