Pricing is an art that is hard to get right all of the time. As a guide, there are many ways to set a price. These include:
- Cost plus profit margin of around 15%
- Predatory based pricing based on competitors
- Market leading pricing
- Opportunistic pricing as well as others
Whichever method you choose, my top rules are:
- Don’t do work for free
- Be consistent and have a price list as a guide
- Do charge more for clients who are time consuming
- If you have a difficult client who doesn’t pay - let them go
- Make sure any pricing that is done by staff is reviewed by the principal
Once you’ve set your price, you must ensure you have a CPI rise every year if not more often. Price rises are fundamental in today's world and clients understand this. A business that misses a price rise each year runs the risk of declining margins and not having the necessary cash to fund its operation.
The rule of thumb is that prices should go up by the consumer price index (CPI) each year, or perhaps slightly more where the business is faced with extra import costs if it’s heavily reliant on electricity, for example 4% is often a suggested figure.
Call in at your local TaxAssist Accountants for help.
By Terry Murphy CPA
Last updated June 2019