Pricing for your social
enterprise
Alan Curtis
2017
ESTABLISHING A SELLING PRICE FOR A
PRODUCT OR SERVICE.
 The
price you charge will have a direct effect
on the success of your business. The basic
rules of pricing are straightforward:
 All prices must cover costs and profits.
 The most effective way to lower prices is to
lower costs.
 Review prices frequently to assure that they
reflect the dynamics of cost, market demand,
response to the competition, and profit
objectives.
 Prices must be established to assure sales.
KNOW YOUR COSTS
 Before
setting a price for your service,
you have to know the costs of running
your business. If the price for your
service doesn't cover costs, your cash
flow will be cumulatively negative, you'll
exhaust your financial resources, and
your business will ultimately fail.
KNOW YOUR COSTS

To determine how much it costs to run your business,
include property and/or equipment leases, loan
repayments, inventory, utilities, financing costs, and
salaries/wages/commissions. Don't forget to add the
costs of markdowns, shortages, damaged
merchandise, employee discounts, cost of goods
sold, and desired profits to your list of operating
expenses.

Most important is to add profit in your calculation of
costs. Treat profit as a fixed cost, like a loan payment
or payroll.
CALCULATING YOUR COSTS

The cost of producing any service is made up of the
following three parts:

Materials cost. These are the costs of goods you use in
providing the service. A cleaning business would need to
factor in costs of paper towels, cleaning solutions, rubber
gloves, etc.
Labour cost. This is the cost of direct labour you hire to
provide a service. This would be the hourly wages of your
cleaning crew salary and benefits.
Overhead costs. These are the indirect costs to your
business in providing services to customers. Examples
include labour for other people who run the firm, whether
administrative assistants or human resources personnel.
Rent, taxes, insurance, depreciation, advertising, office
supplies, utilities, mileage, etc.


DIFFERENT PRICING MODELS
Hourly rate - This ensures that you are achieving a
rate of return on the actual time and labour you invest
in servicing each customer.
 Flat fee – means all the risk is on you as the job may
take longer and therefore you risk losing money.
 Variable pricing - In addition to determining a fair
price for your services, you have to determine
whether you will practice a fixed-price policy and
charge all your customers the same amount or
whether you want to institute variable pricing, in
which bargaining and negotiation help set the price
for each customer

WHEN AND HOW TO RAISE PRICES




Do raise prices when your competitors are raising
prices. If the competition has upped the ante, that is
a good signal that the market can support a price
increase for your services, too.
Do raise prices if your customers say you're a
bargain. If your customers start commenting about
what a great value your services are, that "may be
an indication you're charging too low.
Don't raise prices too much all at once. A big jump
in prices might be too much of a jolt for your
customers. Raise prices in small increments of two
or three a year
Don't raise prices across the board. Do be discreet.
Customers may not notice price increases if they are
only for certain services and not for others.