How to set a price

Entrepreneurs who start their own business sometimes find themselves in a difficult situation. You bought a trial batch of goods, but you still don’t know very well your capabilities as a seller and don’t know whether you can fully realize it, or some part will remain unsold. In addition to the ability to sell at first, you will need to correctly set the price of the goods.

Instruction manual

1

To establish a price, the concept of "price" should be decomposed into economic components. Structurally, the price of each unit of goods is the sum of all your costs:

• associated with the implementation of activities (rent, taxes, utility bills, employee salaries, etc.);

• the cost of purchasing goods for resale;

• also contains a certain share of the profit that you expect to receive.

Thus, if you are able to sell a certain amount of goods at a given price per month, then the month can be considered commercially successful.

2

Further it is necessary to decide on a margin. If we continue our example from the trade, then the mark-up is a premium to the purchase price of each unit of goods, due to which you can pay the costs associated with the activity and make a profit. In retail practice, there are some averaged markups, depending on the group of goods:

• The average margin on food is 25%;

• clothes and shoes - from 50 to 100%;

• Extra charge for small souvenir products and jewelry - from 100%;

• Markup on auto parts - within 30-60%.

Knowing these indicators, you can set a price for your product that matches the market.

3

After the first month of trading, summarize all your expenses and income in one report for yourself. If you were able to realize the planned volume at a good price, pay all the costs incurred and get even a small, but profit - the calculation was made flawlessly. If it was not possible to achieve the planned result, analyze the reasons and perhaps you will lower the prices a little and be able to find what can be done differently and more efficiently.