What Price Success?

March 5, 2015 in Finance, Money, Small Business, Small Business Advice by lizbygrave

by Marcia MacLeod

As I write this, the headline news in print, on TV and radio and online is the revelation that two leading and respected politicians – Jack Straw and Sir Malcolm Rifkind – are yet again embroiled in cash for access scandals. It’s quite clear that even the wealthiest and best-known public figures can be corrupted by money.

And while exposing a couple of corrupt politicians may seem like a million miles away from a small business in north London, there is a price for everything and as small business owners, we all have to work out what the best price is for our product or service – and for our sanity.

Some small business owners are greedy: they charge too much for their offering and therefore struggle, or go bust. Others suffer the same fate – because they charged too little. So how do you reach the optimum price, and how often, and how easily, do you discount?

However good your product or service is, however good you are at doing your job, and however many customers you attract, if you don’t charge the right price, your small business will not succeed. Most people launching their first business would assume that, if this is going to be their sole source of income, they need to work out what they need to live on and price accordingly. But the danger with that premise is that you could end up charging way too much. If, say, you assume you will have 20 customers per week paying £25 and end up only attracting 10 customers per week, you will be in financial trouble and therefore tempted to double the price.Anyone launching a new small business is probably wise to either have a few months’ funding in place before giving up the day job – or begin part-time while you’re still working at your previous occupation.

Before deciding on a rate, it’s best to do some research: find out how much competitors charge; work out what your unique selling point is and if that usp can justify charging a little bit more.

Then you have to decide how flexible that rate can be. Many Small Business Network members will offer a discount to fellow SBN networkers. Many will want to help friends, family and perhaps someone else just starting out that they can see needs a step up the business ladder. But if you start off discounting, especially to someone who may become a regular client – it will be extremely difficult to get the price up.

Is it better to have no work or to work for nothing? That can only be your personal decision, and one that will probably be taken many times over the years. But never forget that as much as we all love doing what we’re doing, we need to earn a living. The mantra for all small business owners should be ‘a professional rate for a professional job’.