One of the most sensitive issues when setting up a business is deciding on your pricing strategy. Whether you are a consultant, entrepreneur, or the owner of a small business or start-up, you need to think about a relevant and sustainable approach. If you operate in a highly competitive industry, selling your services at a high price will not allow you to gain a sufficient market share. Conversely, setting prices too low can lead to a high penetration rate but low profitability.
What is the best way to establish an effective pricing strategy? Check out these guidelines:
Calculate your expenses
Whether you are just getting started or have been in business for several years, it is essential to assess your expenses upfront. In order to establish the right rates, you will have to carefully calculate all the expenses that apply to your activity (social charges, taxes and duties, VAT, fees and memberships, general expenses such as rent and maintenance) as well as costs related to production and distribution.
Keep an eye on the competition
You can’t innovate while following the herd, but you aren’t going to get ahead without a careful market study. One of the best ways to stay informed about pricing policies is to interact with your colleagues but also to regularly attend professional meetings. Your network aside, never forget that Google is your friend: your competitors’ rates are just a click away.
Choose your pricing policy
Depending on your type of business, you have several different options:
You can opt for cost-based pricing, which uses manufacturing or production costs as its basis, or a value-based pricing, which takes into account the perceived value your service will generate for the customer.
If you work as a consultant, a trainer or another type of independent professional, you know pricing intangible services can be challenging. The best option might be to price your services using hourly or daily rates based on your annual income goals. You can always create different rates for your various offers.
Next step: Make the move to online invoicing
Once you’ve followed the three previous steps, you’ll be ready to hit the market with a pricing strategy that will make your business profitable while providing value to your customers.
Now that you have a solid strategy in place, it’s time to streamline your invoicing process. Too often, companies still manage this process manually which makes it a low added value activity due to the amount of redundancy required. Moving to the Cloud by using an online invoicing solution is a great way to increase your productivity and spend more time developing your business.
OneUp, the fastest online accounting software on the market, is the ideal tool to help you with your invoicing. Start your free trial now and join our worldwide community of over 700,000 business professionals!
This post is also available in: French