From the course: Finance Essentials for Small Business
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Product pricing
From the course: Finance Essentials for Small Business
Product pricing
- So what can be so hard about pricing a product? Don't you just figure out what your costs are and then add some sort of markup for profit? Oh, that it were that easy. If your price is too high, regardless of your costs, someone in the market will underprice you, assuming that the quality of product or service is similar. In many cases, you will be a price-taker, and you will have to manage your cost so that you can earn a profit given a certain price as determined by the the market. Now, let me say that again. In most instances, you don't price your product to cover your cost. Instead, you determine if given a certain market price, your cost structure is such that you can earn a profit. The biggest mistake new business owners make in product pricing is not considering and covering all of their costs when entering a market. Now, it is true that when you are initially trying to penetrate a market, you may be willing to…
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