Have you ever truly sat down and figured out the real cost of selling your products and/or services?
Have you included factors like overhead, material costs, your time, + the price point that your customers will buy?
I have to tell you…
Sometimes the real cost of your products/services and a price that people are willing to pay don’t match at all!
“We are all in the business to make money – otherwise, it’s a hobby!”
This is a quote that I’ve shared with numerous small business owners over the years.
I can’t tell you the number of owners that haven’t factored all the real costs of their products/services. Are you guilty of this as well?
Here’s a simple pricing formula that most can follow to determine the price of their products:
materials + your time = cost; cost*2 = wholesale price; wholesale*2 = retail price
For example, say I make headbands. Each headband costs me $10 in materials. I typically charge a minimum of $15 per hour for my time and it takes me about 30 minutes to make a headband. Thus, my total cost for one headband would be $17.50.
By the time I take the cost and do the rest of the formula, am I able to sell my headband at a price to make a profit? The answer to this question speaks volumes.
Here’s a simple pricing formula to determine the price of your services:
your time + overhead + profit (a fair, yet competitive amount) = price of service
Have you fallen into this new business trap?
A lot of new business owners tend to NOT pay themselves an hourly wage in order to sell their products/services at a price that is competitive with others. This is NOT a good business strategy!!!
At the end of the day, here’s what I want you to understand…
- You should know the REAL cost of selling your products/services.
- You should ask yourself if you can do it at a price that makes your business money
- If the answer to #2 is “no”, ask yourself, “Can I afford to do my business solely as a hobby?”
As Your Marketing BFF, I want you to know that it’s not all about price!!!
The biggest factor is demonstrating (marketing) the value to your customers. Once you do that, people will realize that your products/services are worth their cost, and you will see more sales…and the benefits will surely outweigh the costs!
So there you have it!