Sales and Marketing · Start-up Funding · Strategy
How much should my start-up business charge?
When you create your start-up, you might be a little nervous about setting a specific price for what you offer. Whether it’s just not being sure of the value of your service, or it’s a case of nerves over the process of charging for it, there’s a lot that goes into finding the right pricing level. To help we’ve put together this guide on figuring out how much your start-up should charge for its services.
Figure out operating costs first
The most important factor to consider when it comes to deciding on your prices is making sure that you can actually afford to charge the sum you have in mind. This starts with your operating costs, the amount of income you will need to cover your costs could vary quite drastically depending on the kind of business you’re operating.
For example, if you’re operating an accounting start-up business that’s based within your home, then you may have fewer overheads than if you also had to pay for rent, utilities, and equipment in a dedicated new office.
Calculate exactly what your obligatory outgoings are, and compare that against your business projections to see when you’ll break even, and when you’ll start making a profit.
Don’t underestimate yourself
Being a start-up doesn’t mean you’re worth any less than a competing business that’s been in operation for years; you wouldn’t be looking to form your own business if you didn’t have the right mind-set and skillset to succeed, and you didn’t have something about your new business that you felt separated you your competitors.
Your research and preparation before forming your business will likely have given you an idea of a range of prices that your competitors charge. This information will be a useful starting point.
However, you could also use that information to figure out an additional service or feature that your competitors don’t provide. If it’s possible for you to provide something that separates you from everyone else, you could charge a premium for your service.
The additional feature or features and the benefits provided could be the cornerstone of your marketing campaign and promotional materials. If businesses realise how beneficial your start-up can be for them, they’ll be willing to pay for your services.
Start small and scale up
Though it may initially seem a little counter-intuitive, one way you could handle the amount you charge for your services is to deliberately undercharge in the early periods of your business.
Of course, it wouldn’t be a very long period that you maintain this strategy. The goal is to essentially build up a portfolio of glowing reviews from your clients. Once you have a handful of recommendations secured, you’ll later be able to demonstrate a history of fantastic service and a provided value to any potential clients looking to make use of your service.
When you can undoubtedly demonstrate to these potential clients that your business is so useful, you’ll be able to increase the amount you charge. Proving that what you provide has been so well-received by customers and clients means new potential customers and clients will be more willing to pay for your services.
Article courtesy of Federation of Small Businesses
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