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All Work No Profit…No Way

One of the most difficult aspects of starting a business is figuring out how much to charge for your services or products.  You don’t want to charge too much or you may price yourself out of any customer’s budget.  However, it can be equally damaging if you price yourself too low as you will never feel like your business has a fighting chance to survive and grow.

First, find out what you need to charge to maintain your business.  There is always a true cost associated with any work you would do for your clients and you need to calculate what that cost is.  This will give you a starting point to work up from.  For instance, a baker will need to know the cost of the ingredients and time to calculate this.

There are secondary costs, as well, such as utilities, insurance, rent, labor and equipment.  However, these require a different calculation as they are what amounts to your business’ monthly burn rate.  For instance, if these costs combine to 25k a month and you charge $100/cake, (subtracting $20/cake for materials), you will need to sell 312 cakes per month, (11 cakes/day),  just to break even.

I know I am simplifying the process quite a bit but you get my point.  Charging what you truly deserve for your services is a critical detail that can make or break your venture.  Once you calculate it, though, don’t waver from it.

If you are charging a reasonable price and can back it up with service and support then your customer should understand the cost of your service. If you feel the need to waver on your price then your integrity will decrease as the customer will believe even you don’t have faith in your business.  The customer base is a small community and I assure you, somehow, word will get out your price is negotiable.  Your profit/customer ratio will be much lower than you had planned and you will only have to work harder to make up the difference.

If the situation calls for it, then sit down with your client and discuss the price but don’t drop it.  You won’t know if this person is simply trying to haggle or if they presently can’t afford you.  Find a way to help them understand why you are worth what you are charging.

Ultimately, your work can be based on quantity or quality.  It is up to you to decide what is in your best interest.


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