In the first year of a start up operation, there is a great focus of energy from the new business owner on client acquisition. Gaining new customers opens the floodgates for the generation of revenue to pay the bills of the business. However, one of the tough lessons learned by young owners is not thinking clearly though pricing out the services of your business correctly.
Most new business owners tend to undervalue what they charge for their work and services in order to compensate for not being as established as their competitors. As long as you have a top notch customer service experience and offer a product or service that’s similar or better than a competitor, you shouldn’t devalue yourself. If you set this pattern up early with clients, it can be very difficult down the road to raise your prices with your initial customers.
Here a few tips to determining if the price is right on your new product or service you take to market.
- Shop The Competition– As part of a new entrepreneurial venture, you should be doing some research about what kind of competition you have locally or on the internet. Take stock of where your competitors have set the market rate, and place your prices relative to the value you believe you can deliver on in the market place.
- Beta Test Your Top 5- If you have 5 people you know who you are pretty sure will buy your product or service, consider throwing a red herring at them around your pricing structure. Gaining some valuable feedback from these customers could prove to be instrumental in bringing more like kind customers down the road.
- Offer Options– Having several options such as being able to pay annually or monthly, credit card or PayPal, or slight variation of choices off of the same service will allow more new customers to determine the price that is right for them. Be careful about just picking one price point at the initial phase of the business.
This is part two of a ten part series on entrepreneurship. Many businesses fail in the first year because they incorrectly price their product or service. Make sure you focus on getting the price right!
Related Articles – Lesson 1 – Being Under Capitalized
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.
Phone 1.800.355.9318 or 770.777.0427
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Entrepreneur Series – Lesson 2 – Incorrectly Pricing Your Product Or Service