Pricing is key to making money!

Photo by Austin Distel on Unsplash

This might be obvious to many entrepreneurs and no surprise, but making money is the most crucial element of running a successful business. Money (or cash) will ensure that you can do the things that you want to achieve. In my opinion, money should never be the only goal or purpose of a company, it’s just a means to help you get somewhere. See it as the petrol for your car or the oxygen you breathe. Without it, you are going nowhere and you’ll not be able to exist.

If you have founded a company with a mission to plant 1 million trees in Africa, you’ll need money to achieve that. You need money to buy the seeds, you need money to ensure people in those countries will plant the trees, and you need money to monitor that everything is carried out according to your standards. So, money is not the purpose, but just the fuel to make it (= 1 million trees planted) happen.

So, establishing a healthy business model is crucial. Let’s assume you are selling the aforementioned trees for 5 euros per tree. While pricing the product, it is vital to understand all the direct costs that are involved in selling the product (like manufacturing costs, packaging, and performance marketing). But also any fixed costs (like tooling, office or personnel). Too often entrepreneurs think that they are making money, but end up with a loss. If you do not make money on your service or the products sold, your loss will become even higher when you are very successful in selling them.

If I were to set up a new company, I would first invest in someone who keeps track of exactly this (call it a CFO) and someone who would focus on data. But the data part is a whole new subject which I will tackle in another blog post!

Be frugal, spend time on your pricing, and know exactly how much you are spending. And then, enjoy the ride and make your dreams a reality!