Are you using the right prices for your business?

13th May 2018
Most small start-up businesses assume that setting the lowest prices will attract the most customers, and so the most revenue would be made. But think about it. Is this really the right price for your business?

How exactly how do you know what is ‘the right price’?

There is no set ‘right price’ for anything ever really. It all comes down to what sort of service you are advertising, what type of customers you want to attract, and mainly how YOU feel about your prices.

What happens if you put a low price?

Having a low price may attract more customers, and although you will receive less money per customer, your revenue can still remain pretty high, considering you try to minimise all costs, and you do have a LOT of customers (a bit like Primark).

However, you need to put into account how YOU feel about it. You may feel you always put in those long hours, striving and working hard and you don’t really want that headache of seeing your work go down for a price you would expect more from. And often, you may not attract as many customers as you would expect. Because often, when customers see a very low price, they do associate it with low quality.

Another factor to consider is the type of customers you are getting. Are they the type of customers who will bargain over everything? If this is your target customer audience then you have succeeded. However, if this was not really what you signed up for, and wanted customers of a bit higher expectations, then you will need to increase your prices.

What happens if you put a very high price?

When you set the price ‘too high’ you may attract less customers, but your money sales from each customer will be higher.  As long as you ensure that you minimise all costs, you can potentially have the ‘right price’ if your overall profit is high. And you will be satisfied of seeing your work go down for something high.

However, if you see that you are not attracting many customers, and most of the customers that you do have are of a very high standard, you would realise that you are targeting a very small part of potential customers, and therefore need to lower your price for a broader customer range.

So what do I do from here?

You can first evaluate what type of customers you are aiming for. This will help you set your prices according to what will attract that particular customer audience.

You also need to regularly check prices in the market, as prices are never fixed anywhere over time. If you feel you need to increase/decrease your prices, just do so. Your customers will understand why the change of pricing was required, and worst case scenario, you can always explain it to them.

You can also asked a specialised chartered accountant for advice and tips on whether you are using the correct pricing strategy, and how you can improve it further.

Want FREE consultation and advice? Simply click here for a FREE consultation with one of our accountants specialised in this matter.

 

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