Setting proper pricing can be a challenge for most small businesses. It’s finding the right balance between being competitive and staying in business that leaves most small business owners scratching their head. Like Goldilocks, the three bears, and the dilemma of the porridge, many small business entrepreneurs wonder if their pricing is too high (i.e. hot), too low (i.e. cold) or just right (ahhh!).
Here are 5 signs to know when the price is “just right” in your small business:
1. You’re competitive with others in your industry. It’s not always easy to determine your competitors pricing, especially when providing services. Former, current, and future clients prove to be reliable resources of discovering your competitors pricing. Many clients don’t seem to mind “revealing” the prices of your competitors and divulging how your small business prices measure up.
2. You generate enough revenue to run your business. You can tell when your business is cash-strapped. You work more and more hours to meet the needs of your budget AND your clients. When the pricing for your products and services is spot on, you find yourself capable of meeting the needs of your client (the right ones), your budget (a realistic one), and yourself (the most important one) within a reasonable number of hours each week.
3. You have a financial reserve. Every business needs extra cash to grow. Whether it’s for hiring staff, upgrading equipment, or investing in a growth initiative, a “rainy day fund” lends confidence to your business decisions.
4. You attract your ideal clients. If your pricing is too low, you may find clients with restricted budgets flocking to your services. Some of these clients may even be struggling financially. Any small business owner who has provided service for this type of client quickly discovers that if your clients struggle financially, so will you! However, when attracting clients with the proper budget and business mindset, you can charge the appropriate rate for your product and service, provide the caliber of service your clients’ crave, deliver the quality services you desire – all with a little extra elbowroom in your small business.
5. You’re not excessively stressed. Running a business is enough stress for any one person. Running a business when pricing is too low is near impossible for survival. Overworked and underpaid doesn’t make a creative entrepreneur.
Are you enjoying the five signs of your price being right? If not, you might benefit from additional pricing information. Your business strategist and accountant can help with your pricing strategy.
It takes courage and determination to run and grow a successful business. Don’t let the lack of the right pricing information – or fear – get in the way of making your dreams a reality.