smallbusiness.co.uk: Helping your business think big

Pricing is based on three critical points:
• What your products are worth to your customers – its value
• What it costs you to provide your service
• The price your competitors charge

Many start-up businesses work out a cost figure for each product and add a modest mark-up – known as cost-plus pricing. This is not always appropriate however as there are other factors that may influence price.

Researching the competition is always a must, giving you an opportunity to benchmark your potential pricing. Remember though as a start-up and local business you can offer more than low prices (which is the strategy of supermarkets). You can compete on convenience, personal service and even potentially offer home deliveries. It’s also easier to reduce prices than raise them – if in doubt, try higher prices first and be prepared to lower prices if the required sales volume is not achieved and your cash flow is under pressure.

With regards to recruitment, look for someone from the local area that can provide an insight into what the community will be prepared to pay. Also look for someone with experience in running such a business. Advertising can attract a wide range of applicants but can be expensive, depending on the channel you choose. Look to advertise in the local newspapers, notices up on shop windows and community centers. In the advertisement include all the basic information including what experience is required.