Name your price - home-based businesses

Entrepreneur, April, 1996 by Cynthia E. Griffin

What you need to know when pricing your product or service

One of the great benefits of owning a homebased business is that there is no overhead . . . right?

Wrong. This myth--and the difficulties it creates when pricing your product or service--was the motivation behind a new booklet created by the HomeBased Business Association of Arizona (HBBA).

"There are so many homebased business owners struggling with the price issue," explains Eileen Glick, president of HBBA, who along with Valarie Neiman is co-author of No Apologies Pricing: How to Price Your Services and Products for Profit.

"Often, homebased business owners undervalue what they have to offer. This is particularly true of a service business," says Glick.

To determine your pricing, Glick says, you need to do a marketing study to see what the competition is charging. You must also find out how many hours it takes to do a particular job or make a product. Additionally, says Glick, you have to decide how much profit you want to make and what lifestyle you want to live.

You must also realize that homebased businesses do have overhead. "The number-one thing to include [in calculating overhead] is your salary," Glick says.

Other costs to factor into your overhead are a percentage of your mortgage or rent, utilities, property taxes and home repairs. Also consider business equipment, bank charges, office supplies and postage.

"If you produce a product, consider labor cost, packaging, the cost of goods and raw materials, as well as shipping and supplies," adds Glick.

The publication also discusses how to price, what client reactions can tell you about your fees, and how to position your product or service so it is perceived as worth the price.

To obtain the booklet, send $9.95 plus $1.25 for shipping and handling (add 68 cents sales tax if you live in Arizona) to HBBA, 1432 W. Emerald, #717, Mesa, AZ 85202.

RELATED ARTICLE: Good Advice

Sometimes when you operate a business in your home, you have more questions than answers. To help address issues concerning homebased entrepreneurs, Microsoft Publishers has created the Microsoft Small Business Council.

The council consists of Jay Conrad Levinson, new contributing writer to Entrepreneur and author of Guerrilla Marketing for the Home-based Business (Houghton Mifflin); Paul Tulenka, a syndicated small-business columnist and consultant; Brad Edwards, a homebased entrepreneur whose firm, My Fortune, manufactures acrylic fortune cookies; Chuck Green, author of The Desktop Publisher's Idea Book (Peach Pit); Dennis Eskow, editor in chief of Home Office Computing magazine; and Ruthann Lorentzen, director of marketing for the Microsoft Consumer Division.

The Microsoft Small Business Council will address issues such as marketing, communication methods and costs, attracting and keeping clients, legal issues, and the emotional environment of the home office.

For more information, e-mail the council members at dpercifi@edelman. com, or write them at 1500 Broadway, 25th Fl., New York, NY 10036.