How Much are You Worth?
The Huffington Post recently wrote an article from the perspective of what parents should pay a babysitter. This article caused NFIB’s Young Entrepreneur Foundation to think that perhaps young entrepreneurs need to think about what to charge their customers for services too.
Most young ladies have had babysitting jobs and most young men have shoveled a driveway or mowed a lawn. These small businesses are very different to price and market than selling candy bars or magazine subscriptions or jewelry. Young Entrepreneurs often do not know how much they should charge for a service and do not want to come across too greedy. Often times, young entrepreneurs will allow the customer to suggest a price for their service. But going into a business relationship with research, a plan, and the knowledge to negotiate are essential tools for successful business owners.
Do Market Research: The first step in determining your cost is to find what the going rate is in your area. If you are the sole provider of your service (meaning you have no competitors), then you are able to charge a higher rate. If you have competition, then you should research what they charge. Remember to research the exact service that is being provided and how that compares to your own service. Do you have more experience, more training, or are more efficient and effective? Charge more. Doing market research is a key step in determining your cost.
Have a Plan: By having a plan in mind for how much you will charge, you come across as responsible and prepared. You can lay out exactly what you will provide for your cost. As a lawn mower, you might charge more for trimming. As a babysitter, you might charge more for taking the kids on a field trip, then you would if you stayed at home. Having different pricing options allows the customer to make some decisions about the service, bAs a responsible and prepared service provider, customers will continue to use you. First impressions are important, and talking confidently about your cost is one of the first impressions you will make.
Re-evaluate and Negotiate: Once your service business is up and running, re-evaluate your price. Do you have more customers than you can handle? Then raise your price. Is no one seeking out your services? Lower your price. Are people not sure that your price is worth the investment? Offer them a deal as a first time customer. You are the final decision maker on what you will charge, so depending on circumstances, you may be able to charge more or less. Consistently re-evaluating your price as your business grows, keeps your pricing structure fair to both you and your customers.
The cost of a service can be a tricky and intimidating factor in starting a business. But through market research, creating a plan, and understanding the value of re-evaluation and negotiation, young entrepreneurs are able to understand and control the value of their service.
1. Market Research: Lead a discussion on how much students charge for different services they provide. Have them evaluate why some charge more for services than others. Discuss how they decided on their cost and have them brainstorm ways they could begin charging more, or reasons why they should charge less.
2. Have a Plan: Do Entrepreneur in the Classroom Activity 3.5—Projecting Profit. This activity will help students plan their pricing structure, consider revenue, and give them confidence in explaining to customers why they decided to charge their price.
3. Re-evaluate and Negotiate: Do Entrepreneur in the Classroom Activity 3.6a—YOUR Business Plan. Students can define the price of their service, and begin planning their marketing scheme. Negotiating price by offering deals and re-evaluating the qualities that make their service exceptional are part of the marketing plan.
Entrepreneur In The Classroom
Entrepreneur in the Classroom
The NFIB Young Entrepreneur Foundation Entrepreneur-in-the-Classroom (EITC) supplemental curriculum exposes students to entrepreneurship and the necessary steps to take an idea and turn it into a business. The FREE curriculum can be integrated into classes teaching a variety of subjects including music, art, fashion, business and many more. You must be registered to view the full Entrepreneur-in-the-Classroom curriculum.
The NFIB Young Entrepreneur Foundation is a 501(c)(3) organization promoting the importance of small business and free enterprise to the nation’s youth. More information is available at www.NFIB.com/YEF. The Foundation is associated with the National Federation of Independent Business; NFIB is the nation’s leading small business association, with offices in Washington, D.C. and all 50 state capitals.