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SHOW NOTES KEY IDEAS: Today we will be talking about pricing and “is profit evil?”  I did that for a reason.  This is a question that has come up several times.  It came up for me in my business.  It has come up with guests that I have interviewed on the show.  And, it is has come up from people who are working in my industry who have since gone out of business. The fact that they went out of business is a hint as to how important this issue is.  By being generous or being nice, rather than pricing their products or services correctly, they are now out of business and not sharing their gifts with the rest of the world.  This is not a sustainable way of doing business. We need to be concerned with sustainability, business sustainability.  If we use entrepreneurship to support our farming or rural lifestyle and the business fails, then we lose the lifestyle.  So, it is important that we price our goods or services in a way that will sustain our business.  Otherwise, all of the positive impact we could have had with our agricultural enterprise will no longer exist. There are three reasons to bring this issue up.  To get rid of the mindset that profit is bad - we need you to continue to succeed in agriculture To help you figure out how much your produce or service should cost To help you value yourself and your business appropriately.  Too many people reduce their prices because they think if they can do it, than anyone can. This can be because of guilt Because of feeling sorry for potential customers Or because of low self-esteem I know that you all are passionate about agriculture, and that is where you like to focus.  But each of the business owners that I have interviewed on this show has “left agriculture” temporarily to learn about business.  There is a lot of learning to be done about business that is not written in the perspective of agriculture.  So, that is why we are departing a bit today and talking about a business concept. Introduction To Pricing We are going to be talking all about determining the sales price for your products or services.  The prices that you charge will be influenced by cost of production as well as how you choose to promote or market.  There are many different marketing methods out there.  Some cost money, but many do not. Steps For Pricing Determine what your marketing strategy is going to be.  Do you need to spend a lot of money on marketing?  If so, your price will have to reflect that input cost so that you can pay yourself back for the marketing.  How many clients or customers do you expect to receive from your marketing campaign?  What is the cost per customer based on that estimate? Estimate the demand for your product or service.  Is the demand very high with little to no competition?  If you are fortunate enough to be in this position, you can raise your prices with little effect on your production.  Is demand steady but with a lot of competition.  This will impact how much you can charge and force you to come more in line with your competition. Also, remember that in this space that we are describing of small service businesses or the creation of niche products, the customer is looking for more than just the service or product.  They are also looking for a dependable, personable and reliable person.  If you can offer that top notch customer service, there will be demand for you even if you are not the best in your industry at completing the job.  People are hungry for good service. Calculate your fixed and variable costs - fixed costs remain the same, variable costs will change over time.  i.e. fuel cost - this can rise or fall depending on how much you have to drive and what the price of oil is. Set your initial price.  You have to start somewhere.  This is just  your initial price, and there is no pressure to get this perfect.  You are going to have to experiment in the market place to figure out what the product or ...