Dear Entrepreneur,

Never underpricing your product or service.

If your prices aren’t high enough to make sufficient profit, your business will slowly fail even as you bring more and more customers on board. This is one of the common business mistakes that often afflicts service-based businesses, where the temptation is to lowball in order to get your first customers.

Unfortunately, this can be a detrimental mistake.

Use your industry’s benchmarks for profit margins, as well as your own sales and financial projections, to calculate your desired profit margins, and then price your product or service accordingly. You can also review what competing businesses in your area charge. This being said, however, undercutting others on price rarely works for small businesses, instead, figure out what value you can add to justify higher prices.

From experience, undercutting others on price often end up in price war, where you compete with other businesses on who has the lowest price. Price war often ends with one business owner being desperate enough to make the service free. And guess what, this is the quickest way to go out of business.

With love,