A startup business must decide the pricing strategy for it´s product or service. To many this is unexplored territory. However, it does not have to cause too much trouble.
You need to be aware of relatively few conditions when deciding your pricing strategy. Condtitons which apply for all products and services:.
Before your product/service reaches the customer, a number of cost accumulating activities have taken place – activities such as:
Once you have determined your expenses, you can easily apply a "breakeven price" on your product/service. Breakeven price is when all costs to the production/purchase is covered.
Add your required profit to your cost price and you have a sales price. Do not forget to add VAT or other expenses demanded by the state if it is obligatory in your country.
Cost price /raw material
+ Cost of production
= Your sales price
+ VAT or sales tax
= Customer price
Price is only one of many competitive parameters. You should also pay attention to a number of other conditions: service, quality, close to market, prestige, ‘the good story’ etc.
It is not how great you start it, is how great you end up.
- Guy Kawasaki, Chief evangelist of Canva