FT Guide to Business Start Up 2021-2023, 32nd Edition

Chapter 15

How to set a price

There are four ways you can increase your profits. You can cut your costs, you can sell more, you can change your product mix or you can increase your prices. Clearly, your aim should be to set your prices initially at the level that gives you your highest profits possible. Needless to say, as with everything else to do with your business, it is easier said than done. There is no clear-cut or agreed method of establishing a price for your product.

Some people use the level of costs as a way of fixing price. This may seem a straightforward calculation but it has drawbacks. For example, if your costs are very low, does it automatically mean that your prices should be low too? And even working out the cost can be fraught ...