Setting an effective price for your startup isn’t easy. Despite what many people think, the “higher the price, the higher the profits” philosophy is quite flawed. On the other hand, lowballing your price can put your Pakistani startup out of business before it even takes off.
As you can see, you need to be very careful when it comes to pricing your products and services. To help you out, we have compiled the top three pricing mistakes that startups make. Avoid these mistakes in order to keep your business in good health!
- Not Taking ALL Costs Into Account
Failure to accurately evaluate the total cost involved in getting your product to the end user can cost you dearly. It can lead to hidden overhead costs sneaking up on you when you do the accounting and find that sales revenue does not cover your total costs.
The cost of production is not the only cost that you need to consider when pricing your product. Take a comprehensive valuation of all the costs that are involved in selling your product to the end-user. This includes things like packaging, shipping, credit card transaction fees, and other costs that may not be so apparently related.
- Copying Your Competitors Prices
Many startups make the grave mistake of blindly taking their competitor’s prices and slapping it on their own product. This is dangerous for several reasons.
Firstly, it makes it difficult to brand your startup as either “better” or “more affordable” than competitors, since the price will be the same. And most importantly, competitors will likely have different production costs than you, and the price they set may not cover your production expenses.
Rather than copying competitors prices, dig deep to find the intrinsic value of your product. Then assess overheads, production costs, and possible profit margins in order to determine the best price for your Pakistani startup.
- Offering Discounts Instead of Added Value
Discounting seems like an easy way to attract more buyers. But it literally slashes the price of your product and harms revenue and profits. If the discount is high enough, it might even fail to cover production costs.
Rather than discounts, try to find promotions that add value for the same price, rather than slashing the price. This way, you can attract more customers and actually enjoy higher revenues.
Effective pricing is crucial for the financial health of your business. To learn more and to get expert help, contact us at Metric today. We provide the best financial, accounting, and bookkeeping services to help Pakistani startups like yours grow!
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