How do I price my product or service?

Don't start with cost-plus pricing

Adding a markup to your costs is simple but often wrong. A customer won't pay more because you spent more to create something. Start instead by researching what similar offerings cost and what your target customer expects to pay.

Test price sensitivity

Offer your product or service at different prices to different customers or segments and observe what happens. Small increases in price often barely affect demand, but they significantly improve profit. Track which price points lead to the most profitable sales, not just the most sales.

Factor in your minimum earning requirement

Calculate how much you need to earn monthly to cover your personal expenses and business overhead. Then work backward: how many customers at what price do you need? If the numbers don't work, you may need to serve a higher-value market or reduce costs.