Marketing Tips – Small Business Pricing

Pricing is a key determinant in the decision making process customers use to purchase your product or service as well as a key element in determining the profitability of your business. Setting a price for your product or service that appeals to your target market and encourages them to buy is therefore an essential part of your business and marketing strategy.

Before determining your pricing strategy for your business it is important to consider the following:

Your Customer

An effective marketing strategy begins and ends with your customer. It is therefore important to establish how much your customers are willing to pay for your product or service, how sensitive your customers are to changes in price and how price discounting will affect the level of demand and profitability of your business.

Your Product or Service’s Features and Benefits

Unless you have a product or service that offers a unique or additional benefit, and you can communicate this benefit adequately to your target market, if your price is too high you may price yourself out of the market. Look at the features and benefits your product or service offers and how they compare to your competitors. Remember the benefits you provide can either be physical, emotional or both. For example, some customers may see a high price as equalling high quality and are therefore willing to pay a premium.

The Cost of Doing Business

Before setting your price you need to determine what your small business must charge for its product or service in order for you to make and sustain a profit. Look at what the cost and expenses are of doing business and what price you will need to sell at to ensure these expenses are covered. Unless you have a sustainable cost advantage, if your price is too low, your sales volume may not generate enough revenue to cover the costs associated with your business.

The Market and Your Competitors

Your competitors play an important role when setting your pricing strategy. For example, there may be competitors nearby where customers can compare prices so you may need to price match. If it is hard for your customers to compare prices you may be able to charge a premium.

Distribution Channels

Some customers may expect to pay a different price for a product or service depending on which distribution channel they use. For example, if a customer purchases a product over the internet or by mail they may expect to pay a lower price due to the elimination of the middle person i.e. the retailer.

Life Cycle of Your Product or Service

At different stages of your product or service life cycle you may change your pricing strategy to suite your business needs. For example, when you are launching a new product or service you may adopt a low price strategy to encourage trial and repurchase of your product/service on a regular basis. Alternatively if your product or service has a unique point of difference or high cost of production you may charge a premium over your competitors. As your product or service grows in customer awareness and credibility you may be able to sustain a price increase. Alternatively as sales increase, your production costs may be reduced and you may be able to pass on some of these savings in a price reduction or regular promotional offers.

(c) Marketing for Business Success Pty Ltd 2008

Choosing the Right Business Brokers

Whether you’re buying or selling a business, having a broker on your side can make the difference between a successful outcome and a nightmare. However, not all business brokers will be suitable for your specific situation. Use the tips below to choose the right broker for your needs.

Start by asking for referrals from your inner circle of business advisers and colleagues. Have any used a business broker in the past? Were they satisfied? Does the broker handle the type of transaction you have in mind?

You may need to widen your net to find a pool of qualified business brokers that specialize in brokering deals such as yours. Once you have several potential brokers, it’s time to get down to business and narrow the field down. Below are several key factors to consider:

– Is the individual or firm professional? Professionalism shows in numerous ways including personal appearance, the presentation of marketing materials, website, language, mannerisms, and expertise. Use both objectivity and your gut instinct. Remember, the broker you choose will be representing your business so make sure you’re fully comfortable with the person and firm you choose.

– Does the broker have experience working with businesses like yours? While it’s not necessary for the business broker to have specific experience in your exact niche, it’s helpful for the broker to understand the nature of your business and have experience brokering deals with similar characteristics. For example, if you run a family-owned microbrewery, a broker with a successful track record brokering deals for small wineries, family-owned specialty food manufacturers, or small brewpubs may not know the finer points of brewing beers but could be an excellent choice thanks to experience with similar businesses.

– What qualifications does the broker have? Look for licensing, education, certification, experience, and membership in professional associations.

– Is the broker well prepared? In other words, did the business broker do his or her research prior to your initial meeting? Brokers use comparable sales, business and industry reports, and other tools to price businesses. Your business broker should be able to support any suggested listing prices, which should be presented in writing, with documentation.

– If you are selling your business, find out how the broker intends to market your business. Brokers have many marketing tools available to market their business listings. However, some prefer to use specific marketing techniques over others. Make sure to ask the broker to present a detailed marketing plan.

– What type of businesses does the broker work with? For example, if your business has annual revenues in the $50 million range, you’ll need a special type of buyer making it important to choose a business broker capable of attracting those high net worth individuals and investors.

– Check references. No matter how professional, personable, experienced, qualified, and prepared potential broker appear, cover your bases by checking references. Ideally, the broker should give you references from businesses with similarities to yours.

Choosing the right broker to sell your business or help you find a business to buy is a process. Do your part to ensure a successful outcome by choosing wisely.

Small Business Banking

As a small business owner, you will want to focus on banking features that are available, useful and help you realize success with your company. Each financial institution offers unique small business banking programs and packages. There are free business checking accounts, business savings accounts, loans and credit card services as well as online features from credit unions and banks to consider while conducting business. You will want to become familiar with their products so you can choose which will work for you and your business.

When looking at the selection of credit unions and banks, you will see many types of small business banking services that can meet your needs. Some credit unions and banks offer free business checking accounts, while others require a minimum balance. You may need after hour depositing and many small business banking programs include this. Most banks and credit unions offer a debit card or check card with the opening of a free business checking account. This can prove to be a convenient and efficient way to make purchases for your business. You may have an option of an unlimited amount of transactions when you start a free business checking account with your credit union or bank. Check with your financial institution, as there may be limits on usage and account balances.

You will have plenty of options when you open a business savings account. Overdraft protection can certainly be useful when you use your business savings account to cover any overages by your business checking account. Your business funds can earn money with an interest bearing savings account. Each financial institution will set their terms for the amount and the length of the deposit for this type of business savings account. CD’s and money market savings accounts are offered as another source of generating money with your business savings account.

Most small businesses need capital for start up, growth and expansion, and even help through lean times. Credit Unions and banks offer loans and even business credit cards to cover these needs. Many small companies take advantage of business credit cards for convenience and flexibility with their working capital. An example of this would be when using your card to cover the gap in payment for goods and services that your business has invoiced. Small business loans can be an essential element for expansion in the event that you do not have the capital to cover the cost of growing your company. While you can’t predict the future, knowing that your business can take on a loan to assist you through difficult times can put your mind at ease.

Small business banking has grown with the digital age and most banks and credit unions now extend online services to their business customers in addition to free checking and savings accounts. Such services can include taking of care of your accounts payable online, monitoring free business checking and business savings account activity, receiving account alerts at your email or mobile device, bill payment and transferring funds between accounts with the push of a button. Statements through the mail can literally be a thing of the past with online banking. Online small business banking services even allow for the use of accounting software such as Quicken® or Microsoft Money® so that your financial picture can be managed with great ease.

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