Pointers for New Entrepreneurs

3d render of calculator and different graphs depicting statistics concept

Gemma Reeves

By Gemma Reeves

In starting a business, it always pays to have a knack of knowing how much to charge for your services that can draw customers and gain more profit.

However, for beginner entrepreneurs, this can be a daunting task.

Knowing how to price requires practice, and the more you learn, the more confident you can be in knowing that your price is just right.


The equation above may seem easy at first glance. But pricing your services need a lot of thought and consideration. So let’s begin by defining those keywords: Price, Costs, and Profit. Price is the amount of money needed to purchase a good or service. While cost refers to the value of your effort, risks, time, materials, and utilities used to produce and deliver a service. All expenses made in the production are considered as costs, though not all costs made can be expenses. Once a sale is made, the amount of money earned minus the costs for providing the service is your profit.

Do your research

It is always best to start by learning how marketable your services can be. Study the pricing trend of those who sell the same services as you and learn the price range of their services. Evaluate yourself and see how well you can provide your service in comparison and you can have an idea where your price should fall on the scale. Discounts are usually effective in drawing in customers by making them think that they have gained more. However, this can backfire in the long run as consumers will then question the quality of your service for such a low price. Overcharging can also put off customers, especially if there is no significant difference in the quality of your service from that of your competitor. Undercharging will make you lose profit and might push you to lower your quality just to break even. Make sure you balance your price with the quality of service you can offer.

Compute your costs

Remember that your costs cover ALL the expenses needed in the production of your services. This would include but not be limited to the labor costs for your employees, the utilities used, the office rental, the transportation, and the materials and resources consumed in production.

Determine the profit margin

Now that the costs have been determined, you can decide how much you want to profit from your services. The profit margin is the percentage of your costs that you would want to earn. This is where your research comes in. By having a gauge on the price for a similar service from your competitors, you have an idea how much your profit margin should be.

Know your price

With your cost computation and your profit margin, you can now determine how much you should price your services. Get the profit first by getting the percentage of your profit margin from your cost. Then add that amount to your cost, and you get the price. An example would be: if your costs total to 500, and you decide on a profit margin of 25%, then your expected profit would be 125. Add that to your costs, the price of your services would be 625.

When to adjust your price

There is never a fixed price for any product or service. The variables are constantly changing and it would not be wise to fix your pricing based only on your computation. You need to study the trends and change your price accordingly. Here are some tips when adjusting your pricing:

1. Raise your price in small increments and do it discreetly. This is so your customers will barely notice the change and will continue to avail your services. When you are offering a range of services, you can do this by increasing the price of one service, and not go overboard by changing the price list for everything you offer.

2. Make your price competitive. If your competitors’ prices have gone up, this is a good indicator that you should too. This means that there is a demand for your services and this demand can easily sustain the increase. If you price yourself too low and your customers are calling your services a bargain, then that is also a sign that you need to consider an increase. Remember that there are pitfalls to undercharging your services. This can greatly affect the quality of what you have to offer.

Gemma Reeves is a seasoned writer who enjoys creating helpful articles and interesting stories. She has worked with several clients across different industries such as advertising, online marketing, technology, healthcare, family matters, and more. She is also an aspiring entrepreneur who is engaged in assisting other aspiring entrepreneurs in finding the best office space for their business.

Check out her company here: FindMyWorkspace