As small business owners, we know intellectually that we need to set our prices in such a manner as to be competitive with other businesses in our industry and area, but figuring out how to go about that can be another matter. The first step in establishing competitive pricing for your products or services is to do some research to find out what is going on in your market.
Initially, you need to define what your market is and who your competitors actually are. In this day and age, that can definitely go beyond geography. For example, if you are selling books, you might be competing with small booksellers in your city or neighborhood, but you are also competing with large bookselling chains and on-line merchandisers. This means that when you consider your pricing structure, you will need to take all of those business models into account.
If you are offering consulting services, you may be able to just research others in your area who are doing similar things, but if you compete with national firms or other consulting resources, it is worth your while to find out about their pricing structures too.
Most of your research can be done on the internet or by making a few phone calls. This doesn’t mean that it can all be done in a day or two, however. If you work in an industry that is affected by seasonal changes or where there are major differences in different local markets, you will want to take the time to make sure you understand how that is affecting pricing. All of this research will make it possible for you to determine the best pricing plan for your small home business in order to keep you as competitive as you can possibly be. Be prepared, however, to periodically return to your research for updates and to keep up with any changes going on within your field.
See Also: Setting Prices: Charging by the Hour, Project or Product