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Setting Your Product's Price

Selling a product or service at the right price is one of the fundamental decisions every business has to make. Most

businesses establish a selling price by determining:

1. The cost of the product or service, including business operating costs.

2. The profit margin needed to survive.

3. The competitive price that the market will bear.

Your goal should be to achieve the highest possible profit margin while maintaining the highest possible sales level.

Begin figuring your selling price by establishing a true cost of sales. This includes rent, insurance, wages, raw goods, production costs, marketing, utilities and every other expense you incur to get a product or service into the market. Next, add a reasonable profit margin that allows you to put food on the table, invest some cash back into the business, and save something for retirement. Finally, investigate the market. What are customers paying for comparable products and services?

Don’t simply depend on your competitors to set the market price of goods and services. You may be adding value to your product by offering free deliveries. Or you may operate a service business that stays on call 24 hours a day for customers. Those extras allow you to charge a higher price. On the other hand, you may enjoy low overhead expenses that allow you to charge slightly less than the competition. Set your prices accordingly, but don’t be afraid to adjust them to your business’s need and market changes.

Gene Fairbrother

ShopTalk 800® Business Consultant

National Association for the Self-Employed


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