The particulars of pricing your product. Part 1

Typically, accounting-shy fitness center managers are too willing to pass the buck when it comes to financial matters. It is not that managers are unconcerned about such issues, rather, unfamiliar territory can be intimidating.

Generating and analyzing budgets, profit/loss statements and variance reports gets easier as managers become more number-savvy. But what about pricing? Simply watching your competition and adjusting your prices accordingly is a reactive guessing game — and could eventually bankrupt your business.

A quick lesson in price setting can benefit every manager in your facility. Pricing practices should be learned and periodically re-evaluated, as prices can become dated due to rising costs, economic fluctuations, limited access to loans and growing competition. On-target pricing can keep you strides ahead.

Pricing is based on your internal costs and the market’s influence — the economy, technology and competition. The Total Business Manual identifies two crucial factors in price setting: 1) the market (not your costs) determines the selling price (the price ceiling) and 2) your costs and desired profits establish a price floor below which you cannot sell and still profit. The range between the price ceiling and the price floor is your relevant price range. A business can only succeed if it can produce and sell goods and services within this range.

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