How to Price Your Products and Services
Pricing and seem like a foreign thing for those who have never done it before.
It’s especially nerve-wracking to price your items because if you do it wrong, you’ll notice it affecting your sales.
If your prices are too low…
You won’t make enough money to stay in business and your product will be perceived as poor quality or cheap.
If your pricing is in the middle…
You’ll only be making just enough to cover costs but you won’t ever grow as a business or create more products
If your pricing is too high…
You risk your customers going with your cheaper and just as valuable competitors.
If you want to build a sustainable business, you’ll have to calculate your pricing just right to cover costs, attract your customers, and make a profit!
Thankfully, it’s as easier than you probably think!
Pricing Your Products & Services
Below is everything that you should consider when you are figuring out what to price your items with:
Hourly Labor Wage
Simply having a profit isn’t enough.
Some of that profit money is going to go right back into your business to help it grow. But, you also need to pay yourself as you would an employer.
What would your hourly rate be? How much is the time it takes to create each item worth to you?
Think about how much you would need for living expenses and to pay your bills. Of course, don’t get outrageous with this rate. Your pricing needs to make sense.
What is the cost for all of the materials used to create one product? If you are selling a service, consider how you’re going to break down the costs of software (if any) that you use for each client.
How long does it take you to make this one product, or complete your service tasks from start to hitting publish?
Your competitor’s pricing isn’t going to be within your pricing calculator, but you should definitely be paying attention to how they price their items as our business continues to grow.
Your competitors can be your reference for your own pricing:
- Price lower than them to take their business
- Price the same to compete
- Price above them to create the perception of a more valuable product
While you want to use the following pricing calculator to get a good idea of what to price your items, always reference your competitors to make sure you’re either taking their business, directly competing with them, or being perceived as having the most valuable product.
Products Pricing Calculator
To calculate your pricing, take the amount it costs you to make the product and add it to how much you want to pay yourself for your time making it.
Then, take that amount and multiply it by 2 to get your wholesale price (if you plan to sell your items as wholesale to other shops to sell as their own).
For a retail price (if you plan to just list your item without it being wholesale), take the original amount and multiply it by 3.
Let’s say it costs you $10 to make a candle and you want to pay yourself $8 per hour to make it.
$10 (Cost of Materials) + $8 (an hour to make the product = $18 (Original Amount)
Then you would take that original amount and multiply it by 2 for the wholesale price or by 3 for the retail price.
$18 (Original Amount) X 2 = $36 (Wholesale Price)
$18 (Original Amount) X 3 = $54 (Retail Price)
Using these calculations assures that you’ll cover your cost of materials + make sure that you get paid for your time + making a profit to put towards your business.
Pricing Your Products
Pricing is going to be an ongoing battle for you and your business.
You may set your prices at the beginning, but after learning more about your target market, you may decide you should either lower and raise your prices.
Or, your competitors may raise or drop their pricing, which you may want to follow.
Whatever the case may be, make sure you’re constantly reviewing, analyzing, and adjusting your prices as your business continues to grow.
- How do you typically price your products or services?
If you’re ready to create the online business you’ve always dreamed of and complete it all in a way that you actually have time to manage, then you are in the right spot!
Welcome to the blog! It’s where I share my best tips & tricks for growing an online business fluff-free.
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