One of the least understood aspects of entrepreneurship is why some businesses fail while others succeed. The painful truth, according to a recent study by the University of Tennessee Research is that most businesses fail for one of the following three reasons.
46% of businesses fail due to emotional pricing, reckless spending, nonpayment of taxes, lack of planning, record keeping problems, and no knowledge of financing. Companies that succeed take pricing seriously. The prices they set are influenced by facts instead of emotions. As you set your prices consider the cost of material, labor, and overhead. Also, remember to keep in mind competitor pricing. Does this mean that you have to be the cheapest to compete? Absolutely not. You don’t have to compete on price, but you can’t ignore how much your competitors charge either. You can’t succeed on pricing alone, but your business will fail if you can’t get your pricing right.