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Starting a Carwash: Pricing your services

Pricing your products and services is no guessing game.


According to the article “Did You Price Your Product Right? How to Know” by contributor Joe Worth on Entrepreneur’s website, pricing your services or products can be the different between making a huge profit or going bankrupt. But Worth says that pricing your service shouldn’t have to be a guessing game; instead, he offers three things you must determine in order to figure out your price point:

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  • Determine your operating costs. Once you’ve seen how much money you need to operate in a given month, you know how much you need to break even. Then apply it to your product or service goal. For instance, if you plan to wash 100,000 cars in a year, you can determine how much you need to charge per car. Now that you have a set budget, you can test different pricing options: sell more for a lower price or sell fewer for a higher price. As for profit, choosing whether to have a small or large profit margin is up to you. Whatever you decide, you at least know how much you need to make to keep your utilities going for the month.
  • Determine your business goals. The question really comes down to this: Do you want to build market share faster or concentrate on building profits? If you want the former, then lower prices will probably work, but if you want the latter, then fewer sales will probably work best. However, Worth advises against starting with extremely low (or even free) prices to grab your slice of the market because it makes it difficult to raise prices in the future unless you’ve added some new perceived value.
  • Determine what your customers want. This is not always easy, since customer reactions can be surprising. Worth provides the following example. One of his clients created a narrowly-focused high-quality medical diagnostic machine, and when sales dropped a few years after its introduction, the company lowered the price on the machine to induce more sales. However, the price drop translated as “cheap quality” to customers, and sales dropped further. So Worth advised a 20 percent price increase, and the next year, sales rose by 50 percent.

Worth adds as a final reminder that pricing your services isn’t ever set in stone — it can always change when the need arises.


Find the original article here.

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