Setting Your Price Right From The Start
“You can see if you set your margin too low, you’ll get out of business real fast.”
Starting a business can be a very vaunting task. One of the most stressful decision to make is how much you should set your prices at. If your running a consulting business and you’re the best in the business then you better make sure you set your rate to at what you are worth. You can do a market search to see how much other people are charging to give you an idea. But what I would recommend is setting your price to what you feel you are worth. If your new to the game, maybe you need to set your prices a little lower to get your teeth sharpened a bit before a large whale comes walking through that door and you have no idea how to take care of them.
In terms of the restaurant business, I see this time and time again. Especially in small family owned businesses. Many of the business operators have no clue as to how much their food actually cost to make. Yes, they have an idea of how much say a bag of sugar, flour, corn, beef cost. But they haven’t taken the time to find out how much that hamburger actually cost to make. Gather up your items it takes to make that hamburger, the cost of the patty, bread, cheese, and bacon. Once you get that number, then the typical markup is 25-35%.
For retail, the typical markup, if you’re a wholesaler/producer to say a retail shop is 20 percent. Once the retailer gets it, their typical markup is 40-60 percent. If you’re the retail shop, you have to consider the cost of operating your business, employees, the space to rent/utilities, benefits, supplies. You can see if you set your margin too low, you’ll get out of business real fast.
Thanks for reading,
Jason St Clair
Business Management Consultant and President of Atheoz.com
To get a free half hour consolation please reach out to me on our contact page.
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