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INTERVIEW ON THE PRICE OF BUSINESS SHOW, MEDIA PARTNER OF THIS SITE.

Recently Kevin Price, Host of the nationally syndicated Price of Business Show, welcomed Maureen Edwards to provide another commentary in a series.

The Maureen Edwards Commentaries

In the world of business, correctly pricing your products or services is crucial for survival. It’s an intricate balance of art and science, with a multitude of internal and external factors at play. More than just choosing a price, it involves careful calculation of costs, recognizing your value, securing your paycheck, and ensuring profitability. This complexity makes pricing both challenging and essential for business success. A simple pricing formula I use and advise my clients on is the 3-bucket pricing process. This focuses on internal dynamics.

Bucket #1: Add Up All Your Overhead: In the initial step of formulating a pricing strategy, the focus is on adding up every conceivable expense related to producing your product or delivering your services. This comprehensive list should encompass material (cost of goods) and shipping and packaging costs as well as both fixed expenses, like rent and utilities, and variable ones, such as equipment upkeep. Additionally, it’s vital to account for financial obligations like bank loan interest, and the impact of promotions, including discounts or giveaways, on your profit margins. Payroll and payments to external vendors, along with marketing—a crucial yet often overlooked element—must also be factored in.

When considering marketing expenses, tally up everything from website and email platform fees to the costs associated with advertisements, attending conferences, and any other activities aimed at attracting and keeping customers. A useful guideline is to allocate approximately 5% of your targeted annual gross revenue to these efforts, and this should include an allowance for business coaching. Investing in professional guidance not only aids personal development but also significantly benefits your business’s growth and efficiency.

Bucket #2: Pay Yourself What You Are Worth. You own a business to make money. If not, it’s a hobby. Calculate how much you need to pay for your living expenses or replace a salary you once had. This must be factored into every widget produced and every proposal offered. You must include taxes, insurance, healthcare. It all gets factored into what you should charge.

Bucket #3: Include Your Secret Sauce: In this critical phase, perfecting your branding is key. It involves pinpointing your ideal target audience—those most likely to invest in your product, particularly if it’s high-end. Clarify your product’s or service’s unique value proposition and its life-changing benefits and highlight what sets you apart from competitors. Successful branding means crafting a message that’s clear, concise, consistent, compelling, and customer-focused, strengthening your brand value. By doing so, you can justify charging up to 14% more. Allocating this additional margin to a reserve for emergencies and future growth initiatives, such as new technology, extra vehicles, or expanding your retail footprint, is essential for lasting business success. Effective branding not only enhances the perceived value of your offerings but also enables higher pricing and improved profit margins.

Conclusion

In the intricate dance of business ownership, pricing your products or services appropriately emerges as a linchpin for success. By adopting a holistic approach that considers costs, market dynamics, and value perception, businesses can set prices that not only cover expenses but also generate sustainable profits. Remember, the key is to ensure that your pricing strategy keeps you out of the red and positions your business for growth and prosperity so you can make an impact and an income.

Maureen Edwards, a seasoned business builder, inventor, and Fractional CMO at 8 Simple Steps (8simplesteps.net), tackles the crucial challenge of pricing products and services for profit. Ensuring overhead is covered, securing a personal income, and achieving profitability is a complex task businesses face and struggle with. Edwards proposes three straightforward strategies, including a surprising tactic, offering a clear roadmap to financial health. These approaches aim to keep businesses out of the red, enabling them to generate meaningful impact and income. By focusing on critical pricing components and strategic planning, Edwards guides businesses toward sustainable success and profitability.

Connect with her through social media:

Twitter/X: @MaureenE88907