Of Prices, Profits and Markups

Understanding how much you need to charge for your products and services is vital to the success of your farrier business

The ultimate reason for developing a successful pricing system is to make a profit from your work and the products you sell. The amount of profit you’ll realize depends on your costs, selling price, the number of products sold and/or the amount of service rendered. 

There are many business pricing systems or models you can use to set prices for your products and services. Determining the type of system or model to use is an important consideration for success. While no single pricing system or model will work for all businesses, all pricing strategies should take the following into consideration:

  • The cost of the product.
  • The cost of selling the product.
  • How much the product is worth to the customer.
  • The amount of profit or the markup you want to realize from the product.

Markup is simply the difference between how much an item costs you and how much you sell that product for.

Pricing Systems

In general, products can be priced based on one of three ways: market (or customers), competition or costs.

Customer- or market-based pricing is focused on how your customers value the product and how they respond to different price levels. You are trying to determine what they are willing to pay based on the perceived benefits of the product or service.

Competition-based pricing focuses on what products the competition is offering and setting your prices at the same or close to the same price as competitors. Competition-based pricing does not take making a profit into…

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Esco Buff

Esco Buff, CF, APF, is a farrier in Web­ster, N.Y., and holds a PhD in bus­iness administration. He is a member of the Interna­tional Horseshoeing Hall of Fame.

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