Pricing
A lot of small businesses (including myself) struggle at the beginning to determine their prices. Figuring out how much one should charge for their services is never easy and it comes with a lot of insecurity and questions: How much is my service worth? How do I determine my hourly rate and stay competitive? Are our package services/package prices the best choice for our business?
The truth is that there is no universal answer regarding pricing and no general best choice. The optimal decision will depend on the area of economic activity you are working in, the country you are located in, and the political and economic circumstances of the market.
There are, however, different methods you can use to calculate your pricing.
The first and most simple one is cost-based pricing. As you can assume, this calculation is based on the costs a business will have to sell the service or the product with an additional percentage as profit. With this method, the business can determine the lowest and the highest price it can demand for the service (and will usually choose something from the middle of the price scale). Cost-based pricing is typical for businesses which produce in high quantities (e.g. building materials, food products, clothing, etc.). In terms of setting prices, the calculation is based entirely on the company. The business plan is usually to sell more products at a lower price and secure a profit that way. The risk is that customers may find products of similar quality offered at the same or even lower price.
Value-based pricing on the other hand focuses on the beneficial aspects: The value a product or service will offer the customer. In this case businesses have to answer questions like: Does my service save time? Does it increase efficiency? Does it bring higher life/work quality? One very important point is that value-based pricing is not a matter of good marketing of the product, but a matter of understanding your service and what it brings to customers and what it will provide for them. The benefit of choosing this type of pricing is that your prices will be higher compared to cost-based pricing. The disadvantage is that it alienates the customer base motivated by affordability.
For my services, I chose a combination of both methods. Considering what it will cost me to offer my services in regards to the current economic state of the market, the value they will bring to my clients and the core of the services I offer, I came to the conclusion that:
My hourly rate will be 165,00 euros.
For some of the services I offer, I can build package prices: for example, registering self-employment with a free business license (390,00 euros), registering a one-person company (LLC 1.500,00 euros). The packages include additional follow-up hours, so we can keep track and end the process of registration after all the documents have been submitted.
In conclusion, I am of the opinion that every business is different and you have to find your own way to determine your prices. Take a good look into the services you offer, the customers you want to attract, and your competition. Give the different calculation methods a try and your truth will come to you.