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Pricing products and services competitively while still managing to clear a profit may prove one of the biggest career challenges an entrepreneur will face. Though every market sector entails unique circumstances, a few ground rules apply across the board, no matter your trade. Here are some basics:
By the same token, some services (e.g. landscaping, swimming-pool maintenance, tanning salons, chimney repair/sweeping) may experience seasonal fluctuations. In these situations, business owners should price accordingly, with deeper sales and specials when business is slow.
Undercutting your competitors can work, too, but lower profits means reducing operational and inventory costs, as well as limiting customer amenities. On the other hand, pricing above the competition is a viable option when your clients value amenities such as convenience, exclusivity and exemplary customer support over cheaper goods and services. This strategy is worth trying if your market consists of more affluent consumers or your company operates in a higher-income area.
The National Institute of Standards and Technology, an agency of the U.S. Department of Commerce, provides in-depth information on retail pricing in all 50 states. Because laws and regulations vary widely and change often, it’s a good idea to research your own state’s policies before finalizing a pricing structure.
Finally, whatever model you establish, make sure you are offering your clients and customers realistic options in the current market. Fluidity is critical. Track sales and revenues for two or three months, taking note of your system’s strengths and weaknesses. Do not hesitate to make adjustments as often as necessary.