HOW DO YOU KNOW IF THE PRICE IS RIGHT? VtSBDC Advisors weigh in on how to calculate pricing for products & services
As a small business owner, you know more about your product or service than anyone. You have developed an item or a concept to meet your highest standards, and you are ready to bring your goods or services to market. But one of the biggest hurdles entrepreneurs face is how to set your pricing. Why is it sometimes daunting? Because business owners feel that this is the area where they have the least control, and their parameters are dictated by the market. You have to cover your costs, but you want to make a profit. And the topic gets a bit more complex when you must sell to a wholesaler or distributor that then sells to a retail establishment.
So how do you know if the price is right?
VtSBDC advisors and financial specialists Ross Hart and Heidi Krantz collaborated to create a three-tiered spreadsheet tool complete with set formulas for you to “plug in” your specific details. This convenient tool will help you calculate pricing for your goods and services, plus figure out how you need to price for the retailer.
Once you “know your numbers,” ask yourself two important questions:
Does this fit into what your market segment can pay?
Is this price competitive within this space?
If the answer is “no” to either of these questions, you can adjust accordingly and recalculate.
We hope you find this pricing calculator helpful. If you want to learn more about your costs, revenue, cash flow, and your financial picture we recommend watching VtSBDC’s seven-part series, “Know Your Numbers.”
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