When pricing your products and or services it is of essence to consider your finances in terms of fixed and variable expenses. Cost structure plays a significant part in your small business profitability. When determining your cost structure it is important to think like the consumer. “What makes you buy things?” Beth Filla questioned. In order to answer this question it is important to know your consumers and or potential consumers and no matter how long you have been in business it is always beneficial to keep on learning and using those resources. As the discussion went on to answer the question of ‘what makes you buy things,’ a lot of factors came up such as the following: price, assurances, warranty, brand loyalty/habit, status, emotion/therapy, and uniqueness (whether it is by hand/handmade and or special). “Don’t forget all of these ways when you are thinking of pricing your products and or services,” observed Beth Filla. Aside from thinking like the consumer and putting yourself in his or her shoes it is also of significance to know your market within your industry when it comes to pricing strategy. “Understand the consumers you are working with, their finances, and how you will develop your business,” discloses Beth Filla.

Answering the following questions will help you to understand your cost structure and your breakeven point: (1) what are the costs associated with what I am doing? (2) How much should I make to be debt free and start making money? In addition, as Beth Filla explained, it is crucial that you should know your direct costs, overhead costs, owner’s salary and much more and looking at the cost structure worksheet and breaking down all the essentials that goes into it and running your business will be a guide to how to run your business. “If you can separate out your stuff, the more control you have and the more you can itemize that stuff the more beneficial it is for your business success,” added Beth Filla. So how do you as a business owner figure out how much you want to make? You do a budget and you figure out how much you want to make. However, remember when you figure out your monthly expenses you look at all of your expenses. “When you figure out how much you need to make every month it can translate to how much to make in your business and then that translates to the way you make and or connect with your consumers,” Beth Filla described. Also, when trying to figure out your breakeven price remember to use the formula: Total costs divided by quantity sold and as Beth Filla mentioned, “Remember just because this is lined up vertically does not mean this is how you need to calculate it.” The crucial point of knowing your breakeven is not just for the sake of your business, but also if you need any help from banks because banks need to know when you will breakeven in order to help you.

Afterward, the time comes to figure out how or even if your price fits the market that you are in and in order to do that you must know your target market. There are many benefits of knowing your target market such as knowing your potential consumers, knowing your competitors, determining how your product or service fits into that particular market and or how to make it differentiate, helping you with decisions on ways to market and much more. “Once you figure out what your target market is you can figure out or answer the question of how and why you are unique,” Bella Filla states. Thereafter, you need to get the word out about your products and or services, but how? You need to figure out what makes you unique and how to use that beneficially to gain trust and loyalty within your consumers or potential consumers eyes. “What you are and what you are doing is really going to have an impact of where you stand and or fit in the market,” Beth Filla communicated, “Once you can lock into a price it will help you grow because you can anticipate now I know and here is how I can expand.” This will help the growth of your business.

Pricing incentives pay a significant factor of when to cut or raise costs. Always cutting costs will not display loyalty in the eyes of your consumers and knowing which pricing incentives brings more consumers into the doors of your business is what makes consumers want to buy more stuff from you. As Beth Filla explained raising prices is a bit tricky especially when you have consistent consumers, but raising prices by a little percentage once in a while does not do any harm. When going through this process remember to think about what is reasonable when you have consistent consumers. “It has to be perceived added value for the price to go up, added Jamila Powell, Assistant Program Manager at LAEDA. On the other hand, Beth Filla analyzes how you should always inform your consumers of such changes so that way you do not burn bridges. “Don’t lower your prices so much because consumers might think you don’t know how to buy, consumers don’t like your stuff, and you are going out of business,” Beth Filla disclosed. Now how will you determine the pricing of your products and or services and how you fit into the market to gain loyal consumers walking into the doors of your business and helping it grow?

LAEDA and LAEDA WBC host numerous seminars on a wide range of business topics. Seminars coming up include: LAEDA’s WBC Jump Start Series- Work Life Balance, Time & Task Management Skills & Goal Setting on May 2, 2017 at 6:00 PM and LAEDA's WBC Seminar- New Jersey Hiring Assistance Program on May 4, 2017 at 6:00 PM. For details visit our calendar of events.

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