A Quick on Pricing and Profit

Every new entrepreneur faces the inevitable question of how much to price their product or service so as to make a profit. This how much, is a dilemma and how it is dealt with could make or break bank.

To price for profit

Take a Look at Your Material, Labour and Overhead Costs

Begin with the materials. That is, all the parts you acquire to make your product plus anything required for repackaging. So, if you make wooden wine racks, your materials might include wood, nails, and varnish. If you are a website developer you might have internet costs and other application costs that you probably source from some other business.

For the labor, include all the physical labour and creativity you put in to create your product or service. Consider the amount of knowledge required and energy expended on each task. And price them accordingly. It does not matter whether it’s you working on the product or if you hire someone else to do it. You must count every person’s hours as part of your labour expenses.

Overheads can either be fixed or can vary. Fixed overheads costs are all the costs that you must pay every time no matter whether you are making money or not. They almost always include rent, transport and utilities. The variable expenses as the word implies, are expenses that can change month to month. And depend on different factors, like changes and fluctuations in the economy, the prices from suppliers, internet services, shipping, packaging or transport.

When you have a number for these three different types of costs, you can add the numbers together to arrive at a figure for your total cost of output. This number is very important as it will ensure that you come up with the right selling price of your product and most importantly one that ensures you make a profit.

Do Decide Beforehand What Size Profit You Want

The pricing will also be affected by how much profit you want. So, do you want to make a profit per unit, per customer, or will be content with the amount you make once you deduct all the money that went into production? Which is basically cost-plus pricing, where the amount of profit is determined after deducting all the cost.

Or you could calculate the price of the product simply by doubling their costs. Or you could decide you want to make a profit of 50% of the cost of your expenses. It is your decision but be aware that it might be impossible to cover all your costs right away, especially if you’ve just started out and have quite a list of one-time expenses.

Whatever approach you use, you’ll want to be certain to include all your costs to determine whether you are making a profit or not. You do not want to undercharge your customers and end up with a big loss. And you do not want to overcharge and scare any new customers away. In both cases you can end up with your business failing.


Brand your product or service so that it becomes well-known. People will pay more money for a name that they know and feel like they can trust.

Be a trend setter by pulling in some early users of your product or service and have them speak to other people about it. This is where you should consider partnerships with influencers that speak to your target demographic.

Create demand by creating scarcity. Do not offload your product all at once. Wait for the demand to grow then increase the price as the demand grows

Find a niche product or service. If you are the only one with a product or service, you have an easy opportunity to set high prices.

Be exceptionally good to your customers. The service sometimes is what seals the deal. As some clients will pay more for, fast, easy and friendly service. Or if their queries are dealt with in a timely manner and the assurance that they can return a product any time, no questions asked!

Keep an eye on the market prices because it’s highly unlikely that you’ll only set prices once. Monitor your prices and sales, keep an eye on your competition and adjust your prices as necessary.

Mind those costs and ensure they don’t rise significantly without your knowledge and finally,

Listen to the word on the street and note whether the vibes for your product changes for any reason, either in a good or bad way.


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