You’ve set up your new business and now you have to nail down your pricing. With poor financial planning as one of the reasons why small businesses fail, having a strategic plan in place for continually increasing your profitability is sure to increase your odds.

But what is your profitability or profit margin? And how do you build it into your pricing strategy?

Your profit margin is what’s left of your revenue after all your expenses are accounted for. Simply put, what you actually take home from the sale of your product or service.

The pricing of your products and services can make or break your business and with many factors to consider, finding that sweet spot of profitability can be challenging.

Today we will break down 3 important tasks to complete when building profit into your pricing and seeking to improve your return on sales. The following action-steps will ensure you are using a pricing strategy that maximizes your business’ profitability:

  1. Examine your overall costs
  2. Perform Market Research
  3. Evaluate the value of your offer

Setting prices without doing your due diligence of understanding your costs, the current market, and the value you offer will often leave you with low profitability, finding yourself gaining little return on sales for the amount you are putting in or at a price point not feasible for your ideal consumer.

Let’s dive into the steps you need to take to build profit into your pricing.

Examine Your Overall Costs to Understand your Profitability

Delivering a quality product or service to your customers comes with costs that business owners often fail to take into account when determining their pricing. Not only must you consider the materials and labor that go into your product or service, but you need to factor in costs incurred in delivery, marketing, and overhead.

ACTION ITEM>> Take the time to lay out these costs and build a strategic plan for how you will not only cover them, but keep them down and sustainable for your business.

Knowing what these costs are and anticipating market fluctuations can help you to plan your pricing in a way that covers your operation and allows you to see a higher return on sales.

Evaluate the Value of Your Offer

Perception in pricing is key. Many consumers already have set expectations for what a product or service costs, but your unique selling proposition and the value that you provide are what ultimately compels them to make a purchase.

Building value into your product or service allows you to name a price that will be sustainable over time. Understanding the type of value you are offering sets your marketing strategy up to support your pricing. Your offering might cost more than your competitors, but is it delivered with heart and personalization that a corporate giant can’t provide?

While creating a high quality product might cost you more, you can build your price to turn over a profit, as customers will recognize (with a little help from your marketing) the value that quality brings and pay the higher prices.


Understanding the value of your product will help in determining profitablity.

Perform Market Research to Check Yourself

Setting your prices should be done after thorough research of the market you are serving and your competitors. Knowing what consumers are already willing to pay and what your competitors are offering allows you an opportunity to price your offerings competitively and with the unique value you offer in mind.

ACTION ITEM>>Look at the competitors in your market, but do not get caught up in comparisons. It is important to understand how your competitors price their products and services to get an idea of current trends, but your pricing should reflect what you and you alone are offering your customers. See competitor price as a baseline for you to check your pricing against to ensure that you aren’t underselling or pricing yourself out of the market.

It is much more important to know the type of customer you plan to serve and gear your marketing efforts towards and allows you to understand their expectations and the prices that will drive sales. You want your customers to purchase your product or service because of the value you offer over your competitors rather than the number attached to it.

Determine a Fair Profit Margin

Fully understanding your overall costs, your business’ industry and market, and the amount of value you plan to offer your customers gives you the information you need to determine a fair profit margin.

New business owners don’t have the luxury of spending more than they are earning, making their return on sales essential to the sustainability of their business. Being able to build profitability into your pricing strategy will allow your business the opportunity to grow in the future.

Here at Stability Guide we are able to take our expert knowledge and determine the best way to implement financial strategies that increase your profitability and allow growth for your business. Having a team behind you with the experience necessary to avoid common pitfalls and build a strategic plan, will help your business thrive for years to come.

Help your business thrive for years to come!

If you are committed to setting your business up for success from the very start, book a free consultation with us today or sign up for the Startup Accelerator program to help you get started in achieving the right goals for you and your business.