7 Insider Tips for Mastering Price Setting

To keep your small business thriving, it’s crucial to find the perfect pricing for your products or services. By giving pricing the attention it needs early on, you can get it right from the start. Here are seven tips to help you nail your pricing strategy:

First, tap into resources like organizations, trade groups, and data services to find industry standard pricing for your market. Make sure the information includes regional details since prices can vary significantly between places—what costs $5 in Oklahoma might go for $15 in California.

If you’re a consultant aiming to earn $75,000 a year, estimate your billable hours over the year. For example, if you consult 20 hours a week for 48 weeks, you’ll need to charge around $78 per hour.

For product-based businesses, calculate how many items you can sell annually and figure out the cost to make or source them. This will help you set a viable selling price.

People are naturally drawn to “magic numbers,” like $99 instead of $100 or $39.99 instead of $40. Pricing just below a round number can make your products more appealing. This works for services too, like offering a carpet cleaning for three rooms at $99.

Be cautious about slashing prices too often, as it can make your products seem less valuable over time. If you do offer discounts or introductory rates, make sure the original price is clearly shown and the sale price has a firm end date.

Monitor what local competitors are charging but avoid reflexively undercutting them. If you can clearly explain the added value your customers get, you can often justify a higher price.

This is particularly important for service businesses. By adding a bit to your hourly rate, you ensure you cover your needs without billing clients for every tiny task. Instead, market these small, unbilled tasks as value-added extras.

Finally, always remember your worth. Small business owners often undervalue themselves and underprice their offerings. A low price might make consumers think your product or service lacks quality. Know your value and price accordingly.