Many people will price their goods or service based on an industry standard mark up. Whether the mark up is 10% or 300% they use industry standards (or some deviation of the standards).

The alternative is to use the cash flow method. Rather than saying “I need to make an X% markup” you make the determination based on cash flow. This technique involves looking at how much money you need for the given time period (to make payroll, pay expenses, etc) and price your products or services in a way to make sure you, at the very least, have enough cash to pay your bills. While this method wont work long term (since it might require you to price things below cost occasionally) it will help you survive short term.

Keeping margins up is a great thing but sometimes maintaining margins wont allow you to survive the short term. Be willing to go with the cash flow method when necessary. It might be the difference between survival or failure

Just something to think about.

Have a great day!


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