Lots of business owners tend to compromise the price of their goods thinking that it is not great enough to fetch a higher value and are afraid that people will look into the materials used to justify the cost. Their main reason is that the materials they use are not that expensive and they want to sell their goods fast. Although it is a good idea to sell as much as possible in a short amount of time, problems will arise later on as your workforce and volume of materials needed to manufacture goods increase. As a rising mum entrepreneur, you should learn how to do the math on how to adjust prices according to all expenses and time spent in the production.
One important aspect to consider when giving prices to your products is the labor cost. Labor cost is deceptive when you only need a few people to labor the production of goods. The lesser the people, the less worries you will have regarding employee-specific problems. You can just adjust the business expenditures to compensate the needs of your workforce. However, as your business grow into a larger scale, you will realize that prices of goods that are slightly higher than the production cost will produce earnings that will most likely will only get absorbed by labor problems and compensations.
Cost of materials should be studied carefully. Make a sheet comparing the prices of materials in different seasons. If the prices are spiking up and down then it is better if you consider the highest possible spike in all occasions so that your business won’t collapse overnight. If the changes in the prices are not big, it is your call if you will consider the worst case or just the average.
Time is a precious commodity that should be considered when giving prices. How long can you produce one product? Can you manufacture hundreds in a short period of time? Time is as important as the cost of materials used since it can define how much your business can earn in a short period. If you can automate to increase the production then you can consider giving a lower price to your goods. If you can’t and you depend entirely on your workforce, then giving high prices is acceptable as long as the finished product is of high quality.
Giving prices to your products is really hard especially for a startup business but if you are proud of your products and services then go fetch a high price for it. There are some who just tend to multiply the total cost by three to make it safe but if your target customers cannot afford it, you must reconsider and adjust the production cost and how much shedding off of the price you can take without compromising your business decisions.