For many start-ups and small businesses setting sales goals or revenue goals for their businesses is a difficult task. Often armed with little or no sales data, revenue goals are often aligned with expectations tied to recouping the investment and of course; finding cash flow to become self sufficient. These are important factors are the basis for driving any business, but understanding details about your product or service and your company's ability to achieve success is key in any venture.
Some simple steps will help avoid mistakes in over promising and under delivering revenue and losing credibility with your investors.
In our last blog we discussed knowing your target market cold. This extends to understanding your competitive set as well. It's not good enough to simply know the audience you believe will buy your products; you must know what competitors of yours may already be serving them as well. Knowing their strengths and weaknesses is how you find your niche. You may find that a bigger company is also serving your market; however, they may have a out of the box solution that works but isn't exactly designed to support the problems you may be solving. If this is the case, studying their pricing will be helpful in how you set yours. Wouldn't it be interesting to see if a smaller company was also in the space; perhaps offering a similar offering for less?
You have the advantage of creating a pricing model that can compete in value with both of them; but enhances the value proposition that differentiates you that we discussed before in this space that you need to develop.
Pricing should be a value component to your offering and "sold" as such when in front of a client. There is a subtle difference between using pricing as a crutch and using it as a selling tool. If you're struggling with this, ask yourself "why," and "how," and "what" questions to ensure that your are maintaining value in your pricing.
Why is our pricing model an advantage for our customers?
How does this benefit the customer on the short term and long term?
What makes our pricing different and why is that a good thing for our clients?
The answers to those questions and others should tie back to the sales value proposition we discussed previously. Pricing is step 1 in developing revenue goals. Keep in mind that you always want to protect your product and service. Avoiding devaluation in the pricing stage is a critical component.
In future blogs we'll discuss how to begin the process of setting realistic targets. Don't forget to follow us on Twitter @etaconsults
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