SELLING A BUSINESS

Pricing Gets Easier (Sort Of)

Results of survey asking how companies determined the price of their latest product or service.
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Pricing is hardly a science, but it appears to get (somewhat) easier over time. While 9% of those answering our poll admitted to using guesswork to price their most recent product, nearly twice as many said they went with their best guesstimates to price their first product or service. A full 50% of the executives reported that they were able to charge what the market would bear for their latest product, whereas just 23% had been able to do so when they launched their companies.

Also, over time more CEOs became able to cover their costs and make a fair profit -- using what most people refer to as "cost-plus" pricing. However, Bill Hamilton, CEO of Paragon General Contractors, in Point Richmond, Calif., penned his own definition. "Read 'small or no' profit," he wrote.

What approach(es) did you use to price your most recent new product or service? % of respondents

Cover costs and make a fair profit 52%

Charge what the market will bear 50

Match what competitors are charging 37

Price at what related products sell for 22

Use best guesstimate 9

Other 12

Note: Total exceeds 100% because of multiple responses.

Source: Inc. /The Executive Committee survey of 172 CEOs, 75% from companies with less than $20 million in sales, June 1993.

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Last updated: Nov 1, 1993




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