How to Create a Pricing Strategy for New Businesses

The pricing strategy that you implement for your new business is one of the most critical components for its success, and establishing the right prices for the products and services that your company provides involves a delicate balance of several factors. Simply put, prices that are too high will deter people from working with your company, yet prices that are too low may undervalue the importance and quality of the products you provide. Now that you’ve poured your efforts into building a sustainable business, it is time to develop a strategy that ensures a successful launch.

Perform a Market Pricing Analysis

Your first step to develop a pricing strategy is to understand how your company fits into the current market. For instance, you may need to choose lower, more competitive prices if your business will be marketing to the same target audience as multiple other retailers. If your business provides a unique product or service that is not currently saturated in the market, then you can expect to set the prices higher.

Understand the Target Audience

As part of your marketing plan, you should already have a few buyer personas that give you a better idea of who will be purchasing your company’s products and services. Now, you will use those personas as well as information from your market research to figure out how prices are perceived by the people that you expect to frequent your business. For instance, products that are designed for families with young children may need to be more price sensitive compared to a business that offers luxury products or packages to people who prefer designer goods and are willing to pay the price for quality.

Research the Competition

While keeping the target audience in mind, you now need to consider what other companies have similar products and services. Ideally, you should be able to identify at least three of your main competitors as well as a few companies that provide indirect competition. Now, take a look at how they price their products. Do they sell value-added packages or offer steep discounts on certain items? If so, then you may need to provide similar types of options to remain competitive in the market. Alternatively, you could set your business apart from the competition by offering a completely different pricing strategy that taps into your target audience’s needs better.

Choose Pricing That Fits Your Goals

Effective pricing strategies should always meet the defined goals for your company. In most cases, your goal when you are first launching your business is to break into the market. For this type of situation, penetration pricing may be the answer since offering dramatically low prices in the beginning can attract customers to your company’s products. However, you still need to make sure that you do not set the prices so low that you turn customers away once you bring them back up. Promotional pricing helps to avoid this common dilemma since it sets the expectation from the beginning that artificially low prices are only temporary.

Overall

The right pricing strategy for your business should increase profits without being so high that it stops customers from trying your products. While you may need to set your prices lower in the beginning to stand out from the competition, you should also remember that pricing strategies should remain fluid. Be sure to check the pricing strategy as you launch new products or the market experiences a change so that you can always be sure that the prices set increase profitability for your company.

5 of the Best Apps for Finance & Accounting

finance

The days of spending hours hunched over ledgers, crunching numbers are officially over for business owners since technology has introduced more effective ways to manage company finances. While large companies often require complicated accounting software programs, you can be happy to hear that most small businesses can improve their operations with some simple apps. These are five of the best apps for managing financing and accounting tasks for improving your company’s daily operations.

Freshbooks

This app is known for its ability to be seamlessly integrated into a company’s current financial operations, and you’ll love how easy it is to perform tasks such as setting up recurring invoices and subscriptions. You can also use this app to accept mobile payments using your smartphone or tablet, which works great if you are a freelancer or have a sales team that works directly with customers out in the field. The app also comes with an option for live support that helps you roll out this new strategy without experiencing major issues in your daily operations.

Wave

For very small businesses with nine or fewer employees, this app serves as a solution to a multitude of financial recordkeeping challenges. Using this app, you can manage customer invoices and payments while also paying your employees. The app also now offers the option of using their free, personal finance software so that you can manage all of your accounting tasks from a single app.

Quickbooks

Quickbooks makes even the most difficult accounting tasks simple, which is perfect when you need to get back to running the rest of your business. One of the biggest benefits of using this app is that multiple users can all view the same information. Use this app if you share accounting tasks with members of your staff or a partner, so that everyone is always on the same page. You’ll also love the ability to quickly generate reports such as profit and loss sheets that are viewable from a single dashboard that you can access on your mobile device.

Xero

Xero is designed to be one of the easiest apps to set up, and most business owners do require any specialized training to get it up and running. Once you input all of the necessary information, this app organizes it all into areas that make it easy to keep up with your company’s contacts and records regarding transactions. Xero also offers payroll processing and inventory tracking services so that you can do all of your essential accounting work in one place.

OnPay

Payroll can become increasingly complicated as your small business grows and adds new members to the team, and dealing with a missed paycheck or uncompensated hours is never good for company morale. With OnPay, you can handle all of your payroll processes including tax filings in one simple app. While other apps offer some degree of payroll services, you’ll love that this one has specialized features for managing common challenges such as managing compensation and health insurance benefits for your employees.

As you explore new apps, keep in mind that any new program you choose should be easy for your staff to use and simple to integrate into your current operations. Once you integrate a new app, be sure to train anyone who needs to use it and upgrade all of your electronics so that you can seamlessly manage your company’s financial and accounting tasks with a few touches of a button.

NJSBDC AT RUTGERS UNIVERSITY – CAMDEN

DoveLin Enterprises, Inc
Mary Lindsay & Franklin Dove, Jr.
417 Bloomfield Drive
West Berlin, NJ 08091
Tel: 856-767-0600
Website: www.dovelinenterprises.com

DoveLin Enterprises, Inc. is a commercial flooring company established October 7, 2014 by owners Mary Lindsay and Franklin Dove, Jr.  The company provides flooring services to general contractors, hospitals, health service building, colleges/universities, public and private schools, retail stores, office buildings and multi-purpose/multi-family dwellings. Gymnasiums and indoor track are the projects that have particularly received high praise from their customers.  

DoveLin holds women’s owned business certifications through the NJ WBE and the WBENC. The company is also a standing contractor of Floor Layers Local 251 on the East Coast, whose members make up DoveLin’s workforce, which ranges between 15 and 42 employees, depending upon the size of the project and peak work times.

To honor their success, DoveLin is always seeking ways to give back to the community. Along with their employees, the company has donated services to the PAL Organization in Philadelphia and local Christian Schools in New Jersey.

In March 2016, DoveLin sought the advice of the NJSBDC at Rutgers Camden. The owners had hit a roadblock in pursuit of financing. While the business was growing, it was difficult for a business with less than two years in operation to secure the funds necessary to bid on major projects. The Rutgers Camden SBDC stepped in, and according to Mary, “assisted to secure funding which allowed us to bid on high profile projects for several contractors, commercial businesses and retail centers such as Wal-Mart. SBDC consultants developed cash flow projections to support loan requests, loan package development and advised on operational processes and human resources.”

The business has gained a stellar industry reputation in a very short time. They have grown rapidly since 2015 with sales increasing by 60 percent in 2017. The Rutgers-Camden Center continues to service DoveLin as they expand and enjoy the success that excellent customer service and quality workmanship bring.

Smart Small Business Strategies for Surviving the Economic Slump

Survival strategies that small businesses need to manage an economic slump differ from those that large companies can put in place because small businesses have limited resources in terms of human capital, money, and time. Large companies usually focus on macro-level strategic actions such as economic indicator trends and downturns. Small business strategic choices should focus on micro-level indicators that take into account small low-cost incremental strategic actions guaranteed to yield high results, impact and return on investments.

There are five strategy categories or perspectives from which a business can choose to develop their strategic actions: Management oriented strategies; Resources oriented strategies; Knowledge oriented strategies; Business Operational/Internal Systems oriented strategies; or External Environmental oriented strategies. Small businesses need to be aware of their strategic choice orientation in order to be clear about the intentions and significance of your strategic action objective, impact and outcomes or results. Focus on implementing integrated, low touch solutions. Below are some of the micro strategies to take into consideration:

1 Revenue/Cash Inflow Strategies i.e. focus on cash flow statement as an indicator for what’s currently happening to the company’s cash inflow. This allows the business to primarily focus on strategies that are cash inflow oriented because this is what’s likely to keep them in business during the course of the economic slump.

2 Revenue Diversification Strategies i.e. focused on revenue generation strategies, not revenue reallocation strategies. Revenue retrenchment works to a point, but it’s not the only way for small businesses to save their companies in an economic slump. Cutting cost is a “maintenance” strategy – a measure for recycling the same money already in the business so that you can direct it to priority areas or appropriate budgets so that you can stay in business.

3 Market/Service/Product Mix Objectives: Reassess the business objectives (maybe goals) – that would help the business adjust to the prevailing economic conditions. An example would be focusing on Market/services or product MIX strategies. There are many alternatives a business can pursue in this strategy such as:
a) Old services/products to new market;
b) New services/products to old market;
c) New services/products to new market base.

4 Strategic Alignment: Because of their small size, small businesses/companies are quick to shift and have the ability to respond to external changes like an economic slump. This is an advantage. Therefore it is very important to align the business structures, processes, performance measures and/or incentives with internal changes as well as external economic forces.

5 Structures: Internal & External Business structures: Focus on the internal and external operating structures and how they impede or enhance efficiency and effectiveness; how can the business structure be modified to align with ongoing changes without necessarily “compromising” the core business model.

6 Processes: Focus on costly processes in place that increase your cost of doing business; modify and streamline to reduce expenses. For example, what aspects of the doing business processes can be outsourced rather than be maintained in-house? Eliminate “bureaucratic” or “red tape” business processes i.e., technology mediocrity to non-value adding operational routines.

7 Performance Measurement: Measuring performance is huge in eliminating redundant processes. Focus on time management, employee rate of productivity and efficiency, and the impact of business processes and procedures. Performance analytic information should always inform decision making.

8 Human Capital Incentives: Negotiate with your employees for incentives like flex-time if you cannot afford financial compensation; focus on greater role clarification; review employee resumes to identify former training, skills and experiences you can leverage and cross training of employees. Negotiate with suppliers and clients. Communication is key in human capital management.

Dr. Tendai Ndoro is the Director of the NJSBDC at Rutgers University-Newark campus.