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Order # 644SMALL BUSINESS GUIDE TO PRICING A Pricing Resource for Entrepreneurs Here's How to Make More Money in Your Business ISBN 978-1-930199-64-4 306 pages “Price, not timing, can be everything.” Congratulations! You’ve made a good purchase. Thousands of new and aspiring business owners consider pricing the most difficult aspect of marketing. Even seasoned owners find pricing a challenge. This book was written to help you develop sound pricing skills so you can set prices that buyers will accept. According to the U.S. Small Business Administration, there are over 20 million small businesses with 100 or fewer employees in this country. Small businesses form the backbone of this nation. Most of these (almost 14 million) are self-employed entrepreneurs seeking control over their lives and freedom from working in a stressful and mentally stifling corporate cubicle. They have the dreams and the drive to move out and reach for their own stars. But most do not have the business knowledge required to succeed. Many entrepreneurs lack a clear understanding of how to run a viable business. They don’t appreciate operating costs and how to determine the right price to charge. Many owners fail to consider factors, such as the time spent with customers, as a cost. Many neglect to adequately prepare for a job to ensure that the work a customer brings to them is suitable and ready for their actions. Many don’t clearly understand the effect their pricing can have on sales and profit. All too often these business owners are reactive and establish prices based on what everyone else seems to be charging—the “going rate.” They’re slow to raise prices when appropriate and don’t test each price for its effect on sales. And many owners don’t know how to analyze and establish optimum prices to maximize sales and profit. Whether it’s a product or a service, the price you set is critical to the success of your business. Sometimes raising prices increases sales. Under other conditions, cutting prices increases sales. Pricing is a complex, yet exciting part of business. Pricing is part art and part science. It consists of many factors, and the more you know about what affects price and a customer’s willingness to let go of hard-earned cash, the more business you’ll get and the more money you’ll make. Good pricing is a valuable skill, but it can be successfully applied only if you have the right tools to help you analyze and make good pricing decisions. This book provides those tools. It focuses on pricing products and services. Once you’ve learned the “basics” found here, you can apply these techniques to set a price on any product or service you choose to sell. Small Business Guide to Pricing has 10 chapters. Chapter 1 explains the concept of price and what price means to a customer. In this chapter, you’ll learn all the factors that influence the price you should charge. Chapter 2 covers the marketplace and its effect on price. This chapter explains how to analyze your market and estimate demand for your services. Here you’ll learn about price sensitivity and how you can affect the market through smart pricing. Chapter 3 discusses the effect competition has on what you can successfully charge. In this chapter, you’ll learn how to collect competitor information and how to use this intelligence to make better pricing decisions. You’ll also learn how price can be used as a tool to control competitor actions. In Chapter 4, you’ll learn about cost and what should be included in each price you advertise. It also describes the factors that affect your billing rate. Here you’ll learn about fixed and variable costs, direct and indirect costs, overhead, general and administrative costs, and how to put each expense into its own cost category so you can track, evaluate, and control these costs for maximum profit. Chapter 5 is about productivity. You’ll be amazed to learn how important productivity is to cash flow and net profit. Many things affect productivity, including processes, equipment, and employee performance. In this chapter you’ll learn how to measure productivity based on dollars earned per full-time-equivalent employee. And you’ll learn how to identify and control the factors that affect productivity the most. Chapter 6 explains how to calculate a baseline price. In this chapter, you’ll learn how to set a price on every task you do on behalf of a client or customer. You’ll learn how to use cost and productivity to calculate a budgeted hourly cost for each service, and how to use this cost to determine a baseline price to charge. The techniques in this chapter will enable you to bid flat rates on any project. Examples and worksheets show you how you can apply this technique to price each task in a project. Chapter 7 covers profit. It explains the terms and expressions related to making money. These include markup, gross profit, and net profit. This chapter shows you what a balance sheet and income statement look like, and it provides a good insight into cost of services sold and return on investment. In this chapter you’ll also learn how to find break-even point and the optimal selling price. Chapter 8 discusses strategy. It shows you how to select the right services to offer based on your company’s goals. It provides a variety of pricing methods and explains what customers really want and what they are willing to pay. Here you’ll read about creative pricing strategies that are being successfully used by other business owners. Armed with this information, you’ll be able to develop a strategy unique to your own company. Chapter 9 is about tactics. It shows you how to implement your pricing strategy in an operational environment. This chapter explains how to convert strategic planning into tactical actions. It describes things you can do to increase business and maximize profit. In this chapter you’ll get into the trenches of business operations to see where the “rubber meets the road.” You will learn when and how to increase prices, when and how to lower prices, how to price during economic downturns, and how to use coupons and rebates to attract more customers. Chapter 9 describes how to understand your customer, outfox the competition, and counter cutthroat competition and prospective buyers who “low-ball.” Part of your success is affected by how well you estimate and bid. Chapter 10 guides you through the estimating and bidding process. It explains how to respond to a request for bid (RFB) or request for quote (RFQ) and the role of preflight in establishing project difficulty. Examples step you through the process. This chapter shows you how to estimate an actual project so you can follow the steps and quickly begin bidding and negotiating on your own jobs. It explains how to make your bid responsive and more likely to win a contract award. It also shows you how to work with your prospective client and make negotiating a win for both parties. A detailed index rounds out the book. This index is organized to make it easy for you to quickly find the subject of interest. Our world is a kaleidoscope of wonderful opportunities. And we are being lifted up and pushed forward by a technology wave that is changing our lives forever. Some people call this wave an “information superhighway,” a “data highway,” or a “communication revolution.” Whatever we choose to call this paradigm shift, you’ll find more opportunities in business today than ever before in history. And the potential for high income is limited only by your imagination. Yet, to exploit the opportunities and succeed in business, you need comprehensive information. This book was written to help resolve your pricing concerns. It should help you get the price that your product or service is really worth. In the production of this book, the goal was (and still is) to elevate small business owners like you to a level where you can successfully charge (and get) a better price. Owners like you work hard to succeed in business. And few professions have such intense learning requirements. My company recognizes your efforts and wants to do its part to help you earn the most profit on your work and put your fee structure in line with the education and skills required to do the work actually performed. Small Business Guide to Pricing was written for you. Get set for an informative and profitable reading experience.
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