Prices for your new bussiness

by Norma

The secret to getting paid enough to support your lifestyle

moneyDollarsAccording to studies, what it takes to satisfy small business owners is to earn enough money to pay for their accustomed lifestyle. When I hear that, I think to myself, “Surely that is feasible.”

The first thing many new or prospective business owners do is check out the competition’s prices. We told you to do that when writing your business plan, right? I know for a fact that many statups do that because I get those calls, often thinly disguised, embarrassed spy calls. So if you have gathered that information, hang on it. You’ll use it later. For now, we’ll be looking at what really counts.

What you need counts the most

You have to know how much you spend. I hear your pain, but until you know, you can’t establish prices. Here’s your assignment. Starting today, write down every penny you spend and what it bought you. If possible, do this for a few months. This includes your business expenses, of course. It may surprise you that you also need to track you personal expenses too.

Why is that? Because your goal is to live from your business profits, as well as to pay your business expenses. For example, Kelley and Sydney each open small retail businesses across town from each other. They plan to sell the same merchandise and estimate their business expenses will be roughly the same. Does that mean they can charge the same prices for their GottaSellNow Widgets?

Kelley is a happy-go-lucky single, still living at home within walking distance of the store. Sneakers and lattés are Kelley’s greatest expenses for now. Sydney, on the other hand, has a spouse, three children, a mortgage and car payment. Having written down all these expenses for a couple of months (including portions of occasional expenses like summer camp for the kids) it becomes very clear that Sydney has to charge more for his widgets than Kelley does.
Will this put you out of business or keep you from setting a fair price? If so, get out now before you lose your shirt.

More likely, you can compare your prices to the competition and will see that you’re fairly close. Get out you pencil and sharpen it on those frivolous wants. As for Kelley, one day he’ll acquire expenses of his own.

And you? Oh, you’ll see where you can cut personal expenses now that you’re tracking them. Maybe get the kids to pay part of their summer camp feeds from what they earn cutting laws, babysitting, and delivering newspapers. Yes, indeed, you’ll be training the next generation of entrepreneur. They’ll thank you someday.

Tip

If there is more than one household member contributing to personal expenses, deduct their contribution.

Look over you expenses. How many of those items are wants as opposed to needs. Can some of the wants wait until your business is on its feet?


Need help getting a handle on personal spending. Google “How to reduce personal expense” or “living frugally” and you will have a mountain of information appear before your eyes.

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