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Setting the Right Price

How to balance costs and profits when charging for the items you sell
November 10, 2003

Q: I want to turn my hobby of making gift baskets into a homebased business, but I don't know how much to charge for the items I sell. Should I take the cost of the materials and add a small profit? Can I charge the same price as the gift baskets sold at the mall?

A: Setting prices has always been more art than science. Set your prices too high, and you scare customers away. Set your prices too low, and you lose money on every sale. Amazingly, most business owners still set prices the old-fashioned way--by charging the same as the guy down the street.

Ask yourself the following five questions before you put your products or services on the market:

If you had trouble answering any of these questions, it's probably time for a pricing tune-up. If you've got a good relationship with your customers and a specialized product or service that the market wants and needs, you should be able to raise your prices without losing business--and build a solid financial foundation for your company's future.

Rosalind Resnick is the founder and CEO of Axxess Business Centers Inc., a storefront consulting firm for start-ups and small businesses. She is a former business and computer journalist who built her Internet marketing company, NetCreations Inc., from a two-person homebased start-up to a public company that generated $58 million in annual sales.

The opinions expressed in this column are those of the author, not of All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.