Cash Flow and Setting Your Prices

Hawk’s Eye On Business

Every day I talk to business owners talking about cutting their prices.  On the surface this may seem as a good idea, however, it rarely has the results desired by the owner.  Setting the prices in your business is an exercise that most owners make at the drop of a hat.  Carefully scrutinizing your pricing structure, however, can bring more than just cash flow to your benefits side. 

Let’s consider the product that is priced so low that customers think the product must have a problem with it.  For instance, the average price of a home in a certain neighborhood is $200,000 and the hom that just came across your radar in that neighborhood is listed at $137,000.  What’s the first thing that goes through your mind?  How about that 2 year old car that is selling on the Internet and is listed at $8500?  

Let’s also consider the price of a product so high that customers believe it is a rip off.   For instance, in that same neighborhood, would you even consider a home priced at $325,000?  Would you consider buying that same 2 year old car for $35,000?  Most likely, the answer is no. 

On the other hand, let’s consider the home in that neighborood that is priced at $180,000 or conversely at $220,000.  The car for $15,000 or $28,000 is a little closer in line with what you had in mind.  The difference is that one price is so cheap that the product is deemed worthless, one is so expensive it is deemed a rip off, one is a bargain and one is a premium.  

The next time you go through your product pricing exercise, determine these four numbers and you will quickly understand what the market will bear for your products. 

Other resources to this issue are:
Managing your Cash Flow
Is Your Pricing Sound by Sandy Kemp
How Healthy is Your Business – Business Health Check
Business Calculators

Cash Flow Pamphlet
14 Most Common Business Owner Frustrations & How to Fix Them.
8 Biggest Sales Mistakes Small Business’ Make and How to Fix Them   

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Roger Hawk Business Coach

     Roger Hawk is the host of “Hawk’s Eye On Business: KBOI News Talk AM670” and has been coaching, teaching & consulting Businesses for over 18 years. He’s been seen in Who’s Who, Virginia Tech’s Scholar Library, Eagle informer and various social media forums. He serves on Eagle’s transportation committee, and has created numerous support tools to help Business Owners become financially successful.  

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 Material on this web site is copyright © Roger Hawk and R J Holdings, Inc. All rights reserved  
  1. Discounting Your Prices – Good Move or Bad | Idaho Business Coach, 05 March, 2010

    […] Yesterday we talked about setting the price on your product.  Today we talk about discounting the prices once you have set your price.  Before setting your […]

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