1. Know your true costs and margins

Ensuring your prices sufficiently cover all associated costs and generate the desired profit margin is fundamental. Businesses commonly overlook indirect expenses such as electricity, insurance, rent, and other overheads. Miscalculating costs can significantly impact profitability.

Consider John, a business owner who priced his leading agri machinery product at €999 plus VAT, expecting a 21% margin (€210). After reviewing his costing process, he realised that crucial expenses like electricity and insurance had been omitted. He had originally calculated the cost of the product at €789 per unit, however the actual cost was €821, reducing his margin below 18%. To achieve his desired margin, John needed to adjust his selling price to approximately €1,039 per unit. This increase is not overly significant when looking at one product, however the cumulative effect for John would have been very significant if he had not calculated his margin properly and adjusted his pricing.

3. Leverage your Unique Selling Points (USPs)

Differentiating your product can justify higher pricing and attract more customers. Identify and communicate clearly what sets your product apart from competitors - whether it’s superior quality, outstanding customer experience, production efficiency, or enhanced taste or nutritional value.

John’s deeper market analysis revealed a significant advantage, his product processed 20% faster than competing offerings. Highlighting this USP in his marketing could significantly influence customer decisions, allowing John to justify potential price increases and potentially boost sales volumes.