Setting a price is like trying to peek into an abyss. How to be a fair and yet make ends meet? The good news is that there is no mysticism in this task, only calculations and a healthy dose of confidence. Here is what I can offer you in a handy list.
Step one – define all your expenses. All the cents needed to keep things running. So, when talking about handmade candles, the expense of the material is obvious. Did you include the expenses of electricity, advertising and packaging?
They are piling up incredibly fast. Either you pay them out of your pocket or you pay people to pay for you. This is not the recipe of earning money. This is charity with additional problems. First of all, you need to reach the “break-even” point before thinking of earning some profit.
And here comes the most interesting part – adding the margin. You deserve to get paid for your skills and knowledge. Don’t put 10 percent and leave it at that. You are not a vending machine; you are a professional.
Take care to examine prices offered by your competition. If the prices of your competitors are $50 and yours – $20, people will think that their products are better than yours. Price is the sign of the quality, and don’t be afraid to match the price range. Confident approach is needed here.
Forget about the hourly charge if you are selling the services. You are punishing yourself for becoming a professional. Charge for the result or for the value of your work. A logo which will earn millions of dollars for the company is more valuable than a couple of hours of work.
Don’t feel guilty because of the price growth. Get rid of such thoughts. The landlord won’t accept good energy instead of the money for the apartment. This is business, not entertainment.
Put slightly higher price than you consider it to be appropriate. It is much easier to give a discount than to ask for more money. You can always arrange a sale if you need it, but do not begin with too low price since this will attract the wrong people.
Perform price experiments with real people. When everybody agrees without any hesitation, you are too cheap. Some people should say “no”. This means that you are trying to reach the roof. This is scary but necessary.
Remember that you can change your price policy in the future. Pricing is not a tattoo; it is a whiteboard. But you need to keep the old prices for the old clients and charge fairly new ones.
Calculate, estimate, set the margin and hold your position. You have to earn money, and your clients have to have a product, not a charity.