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2 years ago
What To Charge For Your Product or Service
GT Bulmer © Affiliate Power Central
One question I often see in home business forums and Social Networking sites is, "What do I charge for my product or service?"
Surprisingly, there is a simple formula you can use to determine the price to sell something.
Keep in mind, the pricing process I am presenting here is based solely on my experience and my opinion; it is how I like to do it. Someone else might be able to suggest a better way.
To set your price, you must first determine what it’s going to cost you to provide the product or service. Then you must determine how much home business income you want or need to make above the net cost of providing the product or service.
Your costs might include materials, resources, services you need to pay for, and your own valuable time. I don’t know what your costs will be, so I’ll give you an extremely simplified example.
Let's say you are providing a service where your only cost is your time to do it, like writing articles for clients. Let's say you are an efficient writer and you spend just one hour on each article.
How much is one hour of your time worth? In other words, how much do you need to make a day, or a week, or a month to pay your living expenses AND enjoy a comfortable lifestyle?
If you need $4,000 a month, that translates into $1,000 a week, or $200 a day for each of five business days in a week, and if you are willing to work eight hours a day for each of those five days, then you need to get $25 per hour to pay for your time.
In this example, $25 per hour is the MINIMUM you can charge for your service.
That’s the simplified version. If you have other costs involved, they must also be factored in. Every penny you must spend to provide your service must be included. You might have Internet expenses, subscription expenses, fuel expenses and more, all adding up to, say, $160 a month. That would be $40 per week, $8 per day, $1 per working hour of expenses you must cover in your product or service prices.
If you need to clear $25 per hour and you have expenses of $1 per hour, then you have to charge $26 per hour for your service. If your costs work out to $5 per hour, then you have to charge $30 per hour. If your costs work out to $10 per hour, then you have to charge $35 per hour.
What if you don't want to work eight gruelling hours a day? What if you only want to work four hours a day? Simple. Then you must double your base rate to $50 per working hour. ($50 times four hours equals $200 per day.) And since you are cutting your working hours in half, you will have to balance your costs per hour by doubling them. Now, instead of recovering your cost at the rate of $1 per hour for eight working hours, you will have to double it to $2 per hour for just four working hours.
Okay. Enough of that. I hope you get the picture.
Now for the second factor in determining the price you charge for your product or service:
How much are your customers willing to pay?
You want to get paid well, but you also want your prices to be competitive so you don’t scare customers off.
To help determine the fair market value of your product or service, the best thing to do is find out what others are charging for the exact same thing. Once you get a feel for the going rate for your services, you can decide what to charge.
If the going rate is $35 and you need a minimum of $25, you have an opportunity to keep your price low while still making money.
On the other hand, if the going rate is $20, you have two choices. You can drop that product and look for something more profitable, or you can set your price at $25 and work hard at convincing your prospects that you are worth the extra $5. Maybe you can provide some extra service or incentive to sweeten the pot.
If you are just starting out and your prospective customers do not yet know you, you may want to keep your prices lower until you’ve built a reputation for performance and dependability. But make sure your prices cover all your home business costs.
After all, when you are deciding what to charge for your product or service, you must remember that you are in business to make money, not lose money. Determine what you are worth and don’t settle for anything less.
Affiliate Power Central
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