The subject of pricing reared its ugly head again recently when my partner and I had a heated discussion about what price to quote for two projects we'd been invited to tender for. I felt my partner was going in too low and that we were undervaluing both the quality of the work and our time. He, however, felt that the quotes I wanted to give were too high and that we would lose out on the jobs. As ever in business we compromised somewhere in the middle, but it did raise the thorny issue of where we should set our pricing.

What you decide to charge for your product or service is one of the most important decisions you will make as a business person. Both too high and too low will cause you potential problems with your sales and cashflow and will affect the growth of your business. This isn't purely about new businesses as it's also important for established businesses to carry out regular reviews of their pricing to help improve their profitability. Plus, of course, new and growing businesses must always be aware of what their competitors are doing in terms of pricing.

To help you understand where to set your pricing you need to work out your monthly fixed costs along with variable costs you will encounter over the course of a year. Your break-even point is the amount you need to bring in each month to pay basic bills and keep the business afloat.

Now you need to work out the cost of providing each service of job including travel costs and any required materials along with the value of the product/service to your potential customers. You also need to think about what benefits you provide and what criteria customers use to buy. You must establish your value as this is what makes you stand out from your competitors. Of course the reality of putting this into practice isn't so straight forward, but there are resources like Business Link, which offer more detailed assistance.

So, you need to work out your costs, but also your worth, and essential is an understanding of how your finances work. Without this a great looking website or amazing product won't be enough to ensure the success of your business in the long term.

You will find more information about getting your pricing right at Business Link.

If you would like assistance with your business's finances find out more about the financial solutions offered by the experts at Paper Mountain Solutions.

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