CONTENTS
04 06 08 Step 1: Know Your Market
Step 2: How Much Does It Cost You?
09
10
Step 4: Add Profit!
Step 5: Test The Market
Contents | Getting Your Pricing Right
Step 3: Calculate Your Break-Even
F
iguring out how to price your product or service can feel tricky, but it’s one of the most important decisions you’ll make for your business. Your price not only determines your profitability but also shapes how customers perceive your value. A lot of new entrepreneurs start by pricing too low, worried about turning people away. But if you don’t charge enough, you might struggle to cover costs, grow your business, or even be taken seriously in the market. On the other hand, setting prices too high can push potential customers away. The key is finding the right balance! This workbook will help you break down your costs, explore different pricing strategies, and feel more confident in setting a price that works for you. By going through these steps, you’ll: Get clear on what it really costs to make your product or deliver your service. Check out what others in your market are charging so you stay competitive. Explore different pricing strategies to find what fits your business. Pricing isn’t set in stone – it's something you can adjust as you learn more and develop. Testing the market with your customers will help you see if you can charge more or if you need to reduce your prices based on sales. The goal is to make sure you’re charging enough to reflect the value of what you offer, covering your costs (and making a profit!) and staying competitive in the market. Let’s dive in!
mycareer.bathspa.ac.uk | Contents
STEP 1: KNOW YOUR MARKET
T
here’s no fixed formula for pricing - it all comes down to what people will pay. To price confidently, you need a clear understanding of your market, competitors, and what customers are willing to pay. That’s why market research is key - it helps you set a price that reflects the true value of your work. How will you find out what the market price for your product or service is? What market research is needed? Where will you find out what your competitors are charging? Will you look at social media, online forums, or will you ask your potential or existing customers for feedback? What other ideas do you have about researching the market price for your work? Write down what you've done already or will do over the page.
04 | Getting Your Pricing Right
1 2 3 4 5 mycareer.bathspa.ac.uk | 05
STEP 2: HOW MUCH DOES IT COST YOU?
T
o price effectively, you need to understand your costs - including both the time spent creating or delivering your product or service and the actual expenses involved. This means breaking down your:
fixed costs: ones that remain the same, like rent, Wi-Fi, software, insurance (if you're paying yourself or others a fixed salary or wages that stay the same each week or month it's a fixed cost) variable costs: which change, like materials, packaging, travel, hourly labour for yourself or others. Knowing these numbers helps ensure your pricing covers your expenses and leaves room for profit. Write down your fixed and variable costs in the table over the page. You can calculate your costs for a month, six months or a year, or for a project, a production run, etc.
06 | Getting Your Pricing Right
FIXED COSTS
Total:
£££
£ 0.00
VARIABLE COSTS
Total:
£££
£ 0.00
mycareer.bathspa.ac.uk | 07
STEP 3: CALCULATE YOUR BREAK-EVEN
K
nowing your break-even point is essential because it tells you the minimum price you need to charge just to cover your costs - before making any profit. Understanding this helps you set prices that keep your business sustainable, ensuring you're not unknowingly selling your products or services at a loss. To calculate your break-even point, first work out: FIXED COSTS OR OVERHEADS + VARIABLE COSTS = DIRECT COSTS OF SALES Then: DIRECT COSTS OF SALES ÷ UNITS = BREAK-EVEN COST PER UNIT For example, if we were to examine a candle-making business, this could look like: £120 fixed costs + £170 variable costs = £290 direct costs of sales £290 direct costs of sales ÷ 50 candles = £5.80 break-even cost per candle Now lets look at your calculations. Fixed costs of
Direct costs of sales
08 | Getting Your Pricing Right
+ ÷
Variable costs of
Number of units
= =
Direct costs of sales
£ 0.00 Break-even cost per unit
NaN
STEP 4: ADD PROFIT!
T
here’s no one-size-fits-all approach to pricing - what works for one business may not work for another. To find the best fit for yours, reflect on what your market research has revealed and what your break-even cost is, then consider which pricing strategy aligns with your business goals. Take a look at the strategies below and decide whether one stands out or if a combination might work best for you. Will your approach be: COST-PLUS PRICING: Simple formula: Cost + Markup = Price. Example: Product cost £50, markup 50%, so price = £75. VALUE-BASED PRICING: Pricing based on the perceived value to the customer (e.g., brand, convenience, customer experience). Example: High-end coaching services priced higher due to specialised expertise. PENETRATION PRICING: Pricing lower initially to attract customers, then increasing as you grow. PREMIUM PRICING: Charging a higher price due to exclusivity, brand image, or high quality. PSYCHOLOGICAL PRICING: Small price differences can influence customer behaviour. Example: Pricing a product at £9.99 instead of £10. The pricing strategy that I will use is:
mycareer.bathspa.ac.uk | 09
STEP 5: TEST THE MARKET
S
etting the price for your product or service is a crucial decision when starting out or launching something new. However, it’s important to remember that your price doesn’t have to be fixed. The best way to find the right price is by testing the market. If customer feedback shows it’s not quite right, you can adjust. Just make sure you’re covering your costs and at least breaking even if not, take a step back and reassess your pricing and costs.
10 | Getting Your Pricing Right
NOTES
mycareer.bathspa.ac.uk | 11
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12 | Getting Your Pricing Right
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