Setting your prices
Setting your prices has to be one of the most stressful decisions a business owner will ever have to make. The price you want to charge and the price someone will pay for it are two very different concepts. As a business owner, you want to buy in, make or provide services at as little cost to you as possible. You want to sell that item to as many people as possible at the highest price and make a massive profit margin.
The way to work out your profit on a product is as follows.
Cost of goods – Selling Price = Profit
£12.50 – £25.00 = £12.50
Then, of course, out of your profit, you have expenses that have to be covered. The list of costs can be considerable; however, here are a few, VAT, salaries, rent, utilities for the business, marketing.
Setting your prices to match your corporate salary
When I left the corporate world, I wanted to keep the same standard of living, the same income, and charged accordingly. However, this would not work for my clients, so I had to adjust my prices. I have met other people who offer the same services, and they tell me my prices are far too low. However, I am still in business, and they are employed by someone else. Running a business is hard, but you have to get the finances right or you wont have a business.
Setting your prices is good unless you employ a twat
I remember a lady working for a few years ago. Let’s call her Judas. I asked Judas to provide bookkeeping services to one of my clients. After three months of working for the client under the umbrella of my company and seeing the invoice to my client, she spoke to the client and said she would work for them at the price she charged me. The result being, my company lost out on valuable revenue. When she spoke to me, she told me what she had done. Her only response was that she didn’t want to ‘take advantage of the client off’. She is happy with the price she gets for them, and everyone should be satisfied. Except, of course, I was out of a client and no longer had that income.
Judas had not understood that I had spent my money getting this company as one of my clients. On average, it takes two months to get a new client and can cost up to £1000. This spend is on marketing, meeting and understanding their needs, setting out contracts and terms of payment. (Very similar to what an employment agency does). She could not understand why I was so angry.
As you can tell, it irks to this day whenever I think about it. Besides that, I see her once a month working for someone else.
What I learnt about writing my memoirs
- Sometimes people can let you down, and you have to let it go
- Setting prices is not as easy as people think
- Never employ a Judas