Thursday, August 28, 2014

Ten part series on starting a business - Part 5

Pricing and Bidding

One of the most challenging aspects of starting a business, particularly if you are providing a service, is determining what to charge and how to bid.  It might be best to come at pricing from two different directions.  First, if possible, do some research and see what other companies are charging for similar services.  Second, put together a budget including expected expenses and projected revenue, and figure out what you need to charge to cover your expenses.  Budgeting can be especially challenging when you are starting out, because you will not know all of your expenses or what to expect for revenues, but do your best to come to a reasonable budget. 

Study the numbers you have derived from each of these processes, and determine what you will ultimately charge for your services.  If your business is pricing a product, the process is similar, but it may be easier to find out what the market will support and what others are charging for similar products.

Often a business providing a service must submit a proposal or bid to an organization in order to gain them as a customer.  Take care to put together proposals that answer each specific requirement in the request, and be sure that it is professional.  You may find it helpful to read books or take a class on how to write a proposal. Note that each organization/project will want information in different ways.  Some will ask for an hourly rate, some will want a project cost.  Some may not tell you what they want.  Expenses will be handled differently.  For example, if travel is required, the company may pay for that separately, or you may have to include that in your costing strategy.

Competition can be tough depending on your industry and potential customers, especially when you are just starting out and trying to make a name for your business.  Do your homework, be diligent, and don’t get discouraged. 
Kim Luedke is Co-owner of
ProfessionalEdge Associates, offering a wide range of marketing and support services to businesses that want to increase their success, but aren't in a position to add to their staff.