Today, let’s talk about the basics. What is absolutely, the most important thing you can have in order to assure success in your business?

Ponder this for a moment. Most people will answer that their product is the most important. Well, it’s not, profit is. Without profit, all you have is a hobby. While there is nothing wrong with a hobby, you probably don’t read “Create Hype” to help you build your hobby, right?

The biggest reason many business owners don’t make a profit is because their costs are higher than their income. It doesn’t matter if you sell services or goods, you need to make sure you are paid well for your time and you make a profit.

Here’s an example of what I mean: Let’s say you make and sell pillows. The fabric and stuffing cost you $10. Most people double their costs to come up with their selling price. Do sell your pillow for $20? No. You need to factor in the time it took you to make the pillow and your overhead; advertising, electricity, wear and tear on your sewing machine, thread, etc. Let’s say it took you one-half hour to make the pillow and your overhead is $5. If you want to make $30 per hour, your labor cost is $15. Your basic cost the pillow is $30, not $10 ($10 raw goods, $15 labor, $5 overhead). Double this cost to $60 – this is your wholesale price. Double the wholesale price and you have your retail price.

You should sell your pillows for $120. Now you’re making a profit!

But wait! There’s more to it. You need to know your market.

Will your pillows sell for $120? Check pricing on the web. Don’t look at prices at WalMart® or Sears®. Look at upscale sites. After all, if you take the time to make pillows, they should be upscale, right? You can’t compete with products that are made in China, so don’t even try. You might find you can triple your retail price to $180, instead of doubling it or you may need to sell them for $110 instead of $120. Set a price that you are comfortable with and that will sell.

An important component to making a profit is sales. Many people go into business not realizing how much selling is involved. Nothing happens until you sell someone what you have to offer. Unless you are selling bridges, you need to sell to a lot of people. Again, the Internet can help you here. Do your research. It’s fun to spend time creating product, but you need to spend at least 1-2 hours every single day doing something to increase your sales. Make phone calls, send personal emails (not spam!), send out your newsletter, create a special promotion, post something interesting on social media. Spend time increasing your customer base as much as you can.

Knowing the relationship between your price and number of sales is more of an art than science. Large companies have whole departments devoted to setting their pricing. I’ve devoted a whole chapter on the subject of my two business books (Turning Your Passion Into Profit).

Believe in yourself. You know your product and should know your ideal customer. Knowing these two things will help you price your products to make a profit – and profit is what it is all about.

{Featured image via Mary Kilvert}