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by a professional from The University of Texas at Austin - Red McCombs School of Business
in Austin, TX, USA

1yr ago

The # 1 mistake entrepreneurs make:

Forgetting to pay themselves first. Too many business owners set prices to cover costs and forget their most important cost: themselves. Let's fix it: 1. Start with your salary. How much do you need to live sustainably? 2. Add your business costs (team, materials, overhead). 3. Include a profit margin, growth requires reinvestment. If your pricing doesn’t pay YOU, it’s not sustainable.

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reply by a professional 1yr ago
from IMD in London, UK

I'd turn this around and look at value-based pricing (not cost plus pricing). Understanding the value you provide to customers (and their biz model, switching costs, alternatives..etc) and start from there unless you're going for a saturation pricing strategy (with an up-sell to max out CLV once onboarded) or hitting competitors' margin prior to a purchase offer.... Don't forget about CAC too if you're doing cost plus.. If your biz doesn't pursue value based pricing you're leaving money on the table and don't understand your customers well..

reply by a professional 1yr ago
from The University of Texas at Austin in Austin, TX, USA

Yes, value pricing is a great option also, when you know value. And after setting the price, going back and making sure you're making the right margins allows to you price based on the market, include your salary, and make sure the business covers costs.