Did you know that applications for new businesses peaked at almost 5.5 million last year?
If you’re an entrepreneur who is pursuing your dreams of a successful business, then it’s crucial to get your pricing strategy right from the get-go. If you make mistakes, then they can snowball throughout your business as you’re trying to grow.
Are you wondering how to make the most money possible while also offering competitive prices? Keep reading to learn all about how to price business services.
Getting a Baseline
If you want to know how to price a service, you must first calculate your overhead costs down to the penny. The last thing you’d want to do is price your services so that each sale results in a loss. Instead, the overhead costs will tell you the bare minimum you can price your services if you want to break even.
Of course, the goal is to get as much profit as possible while still offering an attractive price that can push away your competition. Since you’re determining a price structure for services rather than products, you should translate your calculations into an hour-by-hour rate.
Determining the Hourly Rate
Are you still wondering how to price services? After you’ve added up your overhead for each month, you should calculate how many hours you plan to be open for business each month.
If you divide the number of hours each month with the cost of overhead each month, then you’ll get an hourly figure you can use when deciding how to charge for your services. For instance, a business that costs $5,000 each month to run for a total of 180 hours should charge a rounded-up figure of $28 an hour if you want to break even.
When it comes to pricing strategies, it’s not wise to break even and call it a day. Instead, you should determine how much profit you can get while still attracting customers.
One way to do this is by looking at the competition and noting what they charge. You could try low-balling them, meeting them, or even going a bit above what they’re asking for. Having a higher price could demonstrate to potential customers that your services are more thorough and worth the investment.
Don’t forget to give your customers high quality invoices. It’s more professional to use a branded invoice template.
Are You Ready to Price Your Business Services?
Now that you’ve learned about how to price business services, you can make sure that you’re making enough money so that your business can grow instead of stagnating or failing altogether. With enough time, you can try to lower your prices so you can compete even more with other companies.
Pricing your business services is only the beginning. To get the latest and greatest tips for your business and many other relevant topics, it’s worth checking out what we’ve published on our site so far. Since there’s always content in the works, it’s a good idea to check back in.