Jack Mencini and Adam Sonnhalter of Maximum Value Partners www.maximumvp.com and cohosts of Dirty Secrets of Small Business discuss in this week’s broadcast how to deal with the good problem of having too much potential business. When this “issue” comes up for prospects or clients they know, the MVP coaches will ask the business owner, “How do you set your selling price?”
While most business owners will say they’d kill to have the problem of having too much business, in reality it “kills” them to have to turn away any business. This can be a real problem though for your business as not all customers are created equally. As a small business owner how do you go about setting your selling price? Do you base it on the prices set by your competition? This is probably the most popular answer we hear, but that is not the right answer if you want your business to thrive.
Copying the pricing structure from your competition is a slippery slope for a smaller company. How do you know that your competition is setting their selling price properly? How do you know they are making money at those prices? To simply be at the lowest price point is putting your company on a going out of business curve. Ultimately, that is not the way to do it.
Chances are you won’t have the information to properly evaluate your competition and how they run their business and their cost structure (e.g. their overhead, the equipment they use is it old, new or leased, etc.). All of these things within the competition’s business could be very different from the operations of your business and thus be a bad way to set your selling price. Changing the selling price to be in line with your competition or to try and beat them out of business could be a formula for disaster.
You need to start by looking at all the costs associated with your business to determine a selling price of your goods and/or services and not rely just on the price point that your competition is using. The major components are material, labor, and overhead (sometimes referred to as fixed costs). All three of these need to be factored in when setting your selling prices to help ensure the health and profitability of your business.
Even if you do have a good handle on your true costs, we have found another common mistake is people confusing markups with margins. They are related but have a very different impact on the profitability of your business. It’s important to use margins to set your selling price vs. markups which will erode away your anticipated profitability.
If your selling prices are in need of evaluation and you are mystified and even scared on how to do this, tune into this week’s podcast on iTunes or http://maximumvp.com/dirty-secrets-small-business-radio-show-podcast/ or call Jack or Adam for help with your small business challenges at 877-849-0670.
Jack and Adam also announced that Dirty Secrets of Small Business is making the move to prime time! Starting on May 3, the show will air live on Wednesdays from 7:30 pm (EST) to 8:30 pm (EST) right after Tech Talk on WINT 1330 AM. The move to Wednesday evenings has the small business coaches, as part of the station’s must-listen-to lineup with other business shows scheduled to air in the evening time slots.
Do you have any How Questions of your own to email to Jack and Adam? Do it by sending your questions to radio@maximumvp.com or submit a question on their web site at http://maximumvp.com/how/
If you have a success story or a question you would like to share, email or call (radio@maximumvp.com or 877-849-0670). You can also call in during the show each week during April at noon (EST) – 1:00 pm on WINT 1330 AM, call 440-946-9468 to ask your question to the Maximum Value Partners’ coaches or tweet your question to @MaximumVP.
Do you have any How Questions of your own to email to Jack and Adam? Do it by sending your questions to radio@maximumvp.com or submit a question on their web site at http://maximumvp.com/how/
If you have a success story or a question you would like to share, email or call (radio@maximumvp.com or 877-849-0670). You can also call in during the show each week during April at noon (EST) – 1:00 pm on WINT 1330 AM, call 440-946-9468 to ask your question to the Maximum Value Partners’ coaches or tweet your question to @MaximumVP.
The post How do you set your selling price? appeared first on Maximum Value Partners.
The post How Do You Set Your Selling Price? appeared first on Dirty Secrets of Small Business.
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