One of the biggest struggles many small business owners face is pricing. Charge too high, and customers may run. Charge too low, and you’ll burn out working for pennies. Finding that sweet spot is the key to building a profitable, sustainable business.
The good news? Pricing doesn’t have to feel complicated. Let’s break it down in simple steps.
- Know Your Costs
Before you even think about profit, make sure you know exactly how much it costs you to create your product or deliver your service.
For products: include the cost of materials, packaging, shipping, rent (if any), and even small things like tape or labels.
For services: consider your time, internet, software, electricity, and any tools you use.
Rule of thumb: If you don’t know your costs, you’ll always undercharge.
- Factor in Your Time
Many small business owners forget to pay themselves. But your time is valuable! Decide how much you want to earn per hour, then make sure it’s reflected in your pricing.
For example: If you want to earn ₦5,000 per hour, and a project takes 3 hours, your labor alone is ₦15,000. Add your costs on top of that.
- Research Your Market
Check what others in your industry are charging. Not to copy, but to understand the range.
Are you offering more quality, convenience, or personalization? Then you can charge a little higher.
Are you new and looking to build trust? You may want to start at the lower end but don’t undercut yourself.
- Add Your Profit Margin
Profit is what keeps your business alive. After adding costs and time, include a percentage for profit. Many small businesses use 20%–50% depending on their industry.
For example: If your total cost (materials + time) is ₦10,000, adding a 30% profit margin would make your price ₦13,000.
- Test and Adjust
Pricing is not permanent. Try it out, listen to your customers, and adjust if needed. Sometimes, increasing your price actually attracts more serious buyers who value your work. - Communicate Your Value
People don’t just pay for the product or service, they pay for the experience, quality, and results you bring. Highlight what makes you different. Share testimonials or reviews. Package your product/service well so customers feel the worth.
Quick Formula for Pricing Products:
Cost of production + Time (your pay) + Profit margin = Selling price
Quick Formula for pricing Services:
(Hourly rate × Hours spent) + Expenses + Profit margin = Service price
Final Thoughts
Pricing is part numbers, part confidence. Don’t be afraid to charge what you’re worth. Remember: you’re not just selling a product or service, you’re selling your skill, effort, and creativity.
Start by knowing your costs, value your time, add a profit margin, and don’t be scared to test and adjust. With time, you’ll find the sweet spot where both you and your customers are happy
