There are a lot of decisions that you will have to make as a business owner. One of the most difficult decisions you have to make is what to charge for your product or service.
Let’s look at what setting a price does. First, it makes your work comparable to others. If you are selling a widget for $5 and another person is selling the same or comparable widget for $4, you have just made it very easy for a consumer to compare the two together. Second, you have given yourself a “not to exceed” cost budget. This price is now your “line in the sand”, your “do not cross” yellow police tape, your “no man’s land”. Your business now lives and dies within that boundary.
Maybe you are thinking to yourself “the market sets my price, I don’t have to worry about that.” Yes, everybody’s widget is $5, so everybody is on the same playing field. That may help you evade the problem of comparison, but that does not get you away from the second problem. The market may set the price, but you have to live with it.
So now we can see that a price allows others to compare us, and it also constrains us. Too high, and we have priced ourselves out of the market. Too low and we cut into our profitability. Establishing the right price, or living under a market established price, can be overwhelming and very difficult. It may be tempting to just “head down and power through”, pick a price and just work like crazy. Hard work and perseverance will pay off, right? But like the adage goes “we lose money on every sale but we make it up in volume”, you cannot “outwork” poor pricing.
The solution is simple, you need to select a price that is high enough to cover your costs and be profitable, yet low enough to keep you competitive. Easier said than done, right? It can be easy though, you simply need to be able to understand what it costs you to make your product or to provide your service. It is very simple, but can also be very hard.
So why is it so hard? If you are a large company, you can hire a cost accountant, supervisors, and analysts who can provide that information to you. You can hire IT professionals to setup data infrastructures and databases to collect and collate raw data and turn it into information that will fuel your business analysis needs.
But what about you? At Modius360 we are focused on helping companies understand their business better. We can help you understand what is making you money, and what is not. We can help you to see where your strengths lie, and help to uncover your weaknesses. We offer an affordable solution that can help you to make money on a job the first time around, and let you know when you need to make a change now, not after the work has already been done.
Call us at 801-810-9844 or visit us at www.modius360.com to setup a free trial.
Measure Improvement
Modius360 Team