Most people set their prices based on what the perceived market price is. Unfortunately, that is not the best strategy for getting paid what you are worth. It usually has nothing to do with getting you money that you can live on either. If you have had problems deciding how to set prices for belly grams, classes, private lessons, studio rental, workshops, etc read on.

Determine Your Cost of Doing Business

The first step to finding the right price for your product or service is to add up all costs. Cost include things that are fixed like rent, insurance, taxes, advertising, interest, depreciation  and variable costs like wages, commissions, utilities, postage, continued training, and office supplies. The total of all these costs will be your break even point. If you make just enough to cover costs, you will have no income.

Calculate your cost per unit (for products )or per hour (for services)

Let’s look at products first. To find the price, take the cost of the product plus the mark-up and multiply that by the number of units you expect to sell. So if a costume cost $125 to purchase and your mark-up is 300% and you expect to sell one costume, your price per costume is $500.00. ($125 + 375 (125 x 300%)  divided by 1= $500)

The same formula applies for services such as belly grams. It’s difficult to determine how much it cost you to produce a service, but let’s say that belly grams are you sole dancing business and your total monthly business expenses are $700. Your work consumes 40 hours each month (this includes rehearsal, booking, driving to the job, preparing music, acquiring costuming and music, etc.) Your formula looks like this: 700 + 1400 (200% of $700) divided by 20 hours equals $105.

You might ask, “Why did you set your mark up so high?” Because belly dance is the type of business where there are wild fluctuations in supply and demand and there are huge chunks of time where you are working but not being paid. You have to cover for administrative time, slow periods, and other things that don’t generate income. Perhaps 300% for retail and 200% for services is not high enough!

Assess the current market value of your product or service and adjust accordingly

If market research shows that consumers won’t pay the price determined by the formula, you have to either reduce your mark-up, cut costs, sell more, streamline the time it takes to produce a product or service or choose another business. If your market research determines that the value is higher than the price indicated by the formula, charge more! The formula is just a starting point. There are other factors that influence where to go from there.

Where are you in the price scale? Are you a Benz or a Chevy? If you are appealing to the budget conscious, don’t start with your price too low. You don’t want to undercut the market. You also want to allow wiggle room so that you can cut prices if there is a downturn in the economy or there is suddenly fierce competition for budget business.

There is room for Walmart and Nordstroms in the same town. If you are going for a high end clientele, be sure to provide the quality that a high price demands. If the service does not live up to customer expectation, you will not be in business long. People are much more forgiving if you price low and disappoint. If your service is comparable to what others can offer, your price should be the same range.

What’s a Chevy price and a Benz price for your area? You can hire someone to do market research for you or do some informal research by checking out what similar businesses are charging. What does a singing telegram go for? A stripper? A clown? Other dance classes, dance gear, or performances?

Test the Market

Once you have an idea of where you want to be, test the market. Not just for how well your price flies, but to see if sales are better with a price of $19.95 vs. $20. For retail, it has been shown that prices ending in cents often give the consumer a feeling of lower price. If you are appealing to a higher end clientele, using whole dollars or prices ending in 5, 9  or 0 are often more appealing. This may or may not be true for your business.