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Making Smart Pricing Decisions Strike a perfect balance when setting your prices to make a higher profit.

By Jacquelyn Lynn

Opinions expressed by Entrepreneur contributors are their own.

It's a question that's critical to your start-up process and a factor that will always be an issue in your operation: How much should you charge for your products or services? The dynamics of today's business environment--fluctuating costs, value-conscious customers, and strong competition--make the pricing decision more challenging than ever.

The consequences of a poor pricing strategy are obvious: Pricing too high may limit your sales, while pricing too low may limit your profits.

S. P. Raj, professor of marketing at Syracuse University School of Management in Syracuse, New York, says it's easy for new business owners to fall into the trap of overpricing. "They often feel their product deserves a higher price than it really does on the market," he says. "There's also the temptation to try and recoup all your expenses as quickly as possible, not realizing that when the product is overpriced, demand goes down." Recognize the influence emotional attachments and financial pressures have on your pricing policies, and balance them with sound business decisions.