Setting the right price for your products

The thumbnail version:

  • Pricing right can ensure that you survive and thrive
  • BDC has useful material to help you.

The full version:

The Business Development Bank of Canada (BDC) publishes a lot of useful material for business owners. I encourage you to sign up to receive their free material by email. One such publication is titled “7 steps to setting the right price for your products or services.” It is full of useful advice on a topic on which most small business owners can use some advice.

Setting the right price — you have homework to do.

I’m always horrified when I hear that a business owner has set prices only according to what the competition charges. You can’t do this because, for one thing, the competition’s cost structure is likely very different from yours and cost is a key element in setting prices.

The BDC article discusses the topic under these seven steps (with examples):

  1. Calculate your direct costs
  2. Calculate your cost of goods sold  (cost of sales)
  3. Calculate your break-even point
  4. Determine your markup
  5. Know what the market will bear
  6. Scan the competition
  7. Revisit your prices regularly

Get the BDC article. Then do your homework.