Lolo Siderman is the Founder & CEO of Gypsywing Media (www.gypsywing.com). In this video she discusses how to determine the correct value of your product or service.
- Common mistake - underestimating cost
- Research your industry
- Plan out expenses
- Plan for a cushion
- Determine the margin you want to make and check it against your industry
As entrepreneurs, one of the hardest things to figure out can be determining how much to charge for your product or service. And one of the most common mistakes there is underestimating how much it’s going to cost you to run this business.
So to avoid that, you can start by researching your industry. First of all, figure out what your NICS code is. That’s the North American Industry Classification System code. And that will help you a lot in determining what are the normal cost in your industry, what are normal margins, what can you expect? And often, that can be wakeup call on what you’re thinking your cost is going to be or what you think you’re going to be making here.
And planning out those expenses, getting it down on paper, put together your spreadsheet, figure out what you’re going to be paying and be realistic about it and talk it over with other business owners because they may think of what you’re forgetting like insurance or internet costs or whatever it may be, just the little fees that add up.
And also plan for a cushion. There are very few entrepreneurs who start their business today and immediately have, you know, a line out the door of customers. There are a lot of times where entrepreneurs need to support themselves for months without any income coming in. So you have all these expenses and they’re often bigger in the beginning and you don’t have the income yet.
And determine the margin you want to make of what you’re doing. And it should be somewhat consistent of with your industry but if you know what you want to make and you know what your expenses are going to be, you can determine where you should be charging, how much income you need.
So those are some tips on determining the correct value for your product or service.