How to Price Your Product or Service

Pricing is perhaps one of the most difficult areas of new business planning. What price tag can you place on the value that you provide your customers? What's the magic formula?

The truth

As you work through the competitive analysis section of your business plan, you may begin to realize that while price does play an important role in your business, it's not as important as one might think. If the success of your business is based solely on offering the lowest price, you may wish to reconsider. Many a business has gone under with this strategy in play.

Consider this true story: A talented professional wall muralist was pricing herself out of business. Her prices were much too low but she didn't realize this. She thought her customers could not afford her work. Every job quote became an exercise in price negotiations. On the brink of cleaning her brushes for the final time, she decided to raise her prices substantially. The result? She began to attract a much more affluent clientele. Her business is now thriving, and she has a waiting list for in-home and in-business wall murals.