My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

How Much Should You Charge?

Consider these factors before pricing your product or service.
2 min read
Opinions expressed by Entrepreneur contributors are their own.

Before you can set a price for your product or service, you have to determine the costs involved in running your business. If the price you set for your product or service doesn't cover your costs, you will have to infuse more cash into the business until your resources are depleted and your business fails.

Exactly how much should you charge so you don't ruin your business? You must add fixed costs--equipment leases, loan repayments, management costs (such as salaried employees) and depreciation--to the variable costs of raw materials, inventory, utilities and hourly wages/commissions. You must also calculate the costs generated by markdowns, shortages, damaged merchandise, employee discounts, costs of goods sold and desired profits, and then add them to the operating expenses listed above. You can then arrive at an initial price for your product.

The most important aspect of cost vs. price--a factor that you must grasp if you are to learn how to price correctly--is that, ultimately, the market dictates the price you may charge for your product or service. Your costs of providing customers and clients with that product or service simply establish a minimum or break-even figure and the maximum price you could demand (and get) for your product or service.

Excerpted from 303 Marketing Tips: Guaranteed To Boost Your Business

More from Entrepreneur

Learn to be a better leader and develop successful marketing and branding strategies with Dr. Patti Fletcher's help.
In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur