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3 Common Small Business Pricing Mistakes

calculator, calculating, business expenses, small business pricing, small business price tips, startup pricing, recently identified the three common pricing mistakes that small businesses tend to make. Getting your pricing right is essential especially if your profit margin is a main target.



Pricing Mistake 1 – Everybody’s Doing It


You’re nearly ready to release a new product or service, which you have been developing for a while and you still haven’t set the price. To save time you end up basing your price on your competitors’ prices. However the lowest price is £100 and the highest price is £599. The majority of competitors’ prices are in a tight range between £325 and £375. Hmm… why not charge £365?


Can you relate to this situation? If the answer is yes, read on…


There are two main problems with this approach. The first problem is the assumption that your competitors are making a profit at the price they are charging. Larger corporations can often sustain making a loss to drive competition out of the market for a long period of time. Also I’m sure we all heard it from our mums as kids, but “if all your friends jumped off a bridge would you jump off too?”


The second problem is that you’re relying on guess work. You have no idea if the price covers your expenses or whether it is simply too low for your business. 



Pricing Mistake 2 – Minor Costs


It’s vital you minimize unnecessary spending within your business. Entrepreneurs often tend to ignore minor costs, which can be a real profit killer. Consider a weekly expense of £5. This sums seems fairly insignificant in the grand scheme of things but once it has been multiplied by 52 weeks, at £260 it doesn’t seem quite so small. These small sums soon add up, so it's worth keeping a close eye on your finance.  



Pricing Mistake 3 – Why Are You Working for Free?


Often entrepreneurs assume that their pay is in their profit margins. This assumption is wrong, your profit margins are what your company earns. You need to pay yourself for your time as you would with an employee. Calculate the cost of your time (if it helps, imagine you’re the employee) and include that in the price. Make sure you don’t forget to pay yourself!


If you still want to work for free give me a call – I have plenty of projects on my desk!


Have you made these pricing mistakes or encounter any others that weren’t mentioned? If so, please let fellow entrepreneurs know how you overcame the pricing problem by commenting below!


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