How To Price Your Products?

Pricing your products is one of the important decisions as it impacts almost every aspect of your business. Your pricing is the deciding factor in everything from your income, to your profit margins, to which expenses you can afford to cover. That is why it is easy to get stuck on pricing when you are launching a new product. It’s a key strategic decision you need to make for your business, and it can be just as much an art as it is a science. You can sustain your business only if you get good profit margin. If you price your products at a loss or not good profit margin it will be challenging for you to sustain your business. Another aspect to consider is how you are priced in relation to your competitors and what your pricing strategy means for your business and your customer’s expectations. There are three straightforward steps for calculating a sustainable price for your product. First is the cost of raw materials and then the time you spend on your business. To price your time, set an hourly rate you want to earn from your business, and then divide that by how many products you can make in that time. Then add your profit margin to your products on top of this. You have to consider your competitors also while pricing else you might find sales more challenging. As you know social media is the best platform to start your business, there is also lot of competition. As your products are already priced right all you need is visually appealing posters of your products and engaging content to go with your products. With this marketing strategy, you can be successful on any social media platform.  To set a sustainable price, make sure to incorporate the cost of your time as a variable product cost. Let’s say you want to earn a 20% profit margin on your products on top of your variable costs. You need to consider the overall market, and make sure that your price with this margin still falls within the overall “acceptable” price for your market. If you’re 2x the price of all of your competitors, you might find sales become challenging depending on your product category. Once you’re ready to calculate a price, take your total variable costs, and divide them by 1 minus your desired profit margin, expressed as a decimal. For a 20% profit margin, that’s 0.2, so you’d divide your variable costs by 0.8. In this case, that gives you a base price of $17.85 for your product, which you can round up to $18.00. Fixed costs are the expenses that you’d pay no matter what, and that stay the same whether you sell 10 products or 1000 products. They’re an important part of running your business, and the goal is that they’re covered by your product sales as well.

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