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Step 10: Set Your Price

Find the right figure to make the highest profits.

Find the right figure to make the highest profits.

When launching your own business, the decision of how much money to charge for your product or service requires careful consideration. If you charge too much, you risk failure by pricing yourself out of the market. If you charge too little, potential customers may question the quality of your offerings.

A common mistake made by new business owners is underpricing their offerings. This results in the inability to cover all necessary expenses and still turn a profit. When trying to decide on a price, it's important to consider all of the costs related to providing your product or service--supplies, overhead, production, transportation, promotion--before settling on a figure. It's also important to find out what similar providers in your market are charging and to adjust your figure accordingly.

Successful entrepreneurs price their offerings safely between their price ceiling (the top price a customer will pay for a product or service, as determined by market research) and their price floor (the price below which they cannot offer their product or service and still generate the necessary profit). Unique or special features enable you to charge more for time and talent; substantial competition requires charging less in order to break into the market.

The pricing strategy followed varies dramatically from one business to the next. Our Starting Smart entrepreneurs are back to share their own unique approaches to pricing.


A business writer for the past eight years, Kylo-Partick Hart has run a successful homebased consulting business since 1989.

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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: Step 10: Set Your Price.

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