Pricing is one of the most important decisions in your business, yet many entrepreneurs copy a neighbour's price or guess. The result is working hard for little profit. Here is a better way.
Step 1: Know your full costs
- Direct costs: materials, stock, packaging, delivery
- Overheads: rent, power, data, salaries, licences
- Your time: pay yourself, even if it is a small amount
Divide monthly overheads by expected units sold to get overhead per unit.
Step 2: Choose a pricing method
- Cost plus: total cost per unit plus a margin.
- Competitor based: set prices near the market, then compete on quality and service.
- Value based: charge based on the value to the customer. Consultants, designers and specialists should use this more.
Step 3: Test and adjust
Watch sales volumes, customer feedback and profit. If customers buy instantly without asking, you may be too cheap.
Pricing services
Choose hourly, per project or retainer pricing. Write a clear scope so extra work is paid for. Ask for a deposit before starting.
When to raise prices
Raise prices when your costs go up, demand is high, or you add value. Give regular clients notice and explain the improvement.
Avoid these mistakes
- Ignoring hidden costs like transport and mobile money charges
- Endless discounts
- Competing only on price
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