Running an online business is so cool. You just run your business with zero expenses. It is income, income, income, and no payments. No rent. No electricity costs. You can sell your goods and enjoy a huge profit margin. True?
False.
Unfortunately, this is the impression many people carry around. Running a business online has no costs other than the product or service cost. This is not true. You may have avoided or reduced certain business costs by running your business online, but there are still costs you have to factor into your pricing.
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Many people claim to be running an online business, but they have converted one of the rooms in their house into an office for receiving visitors or a warehouse for their goods. This is space that you have to factor into your running costs. You should consider your rent, make an appropriate estimate of what that space should cost monthly or annually, and then add it to your running costs.
How about your utilities? You must be spending something on data, phone calls, follow-up emails, etc. If you are running sponsored ads or promotions online, your running costs should also absorb these costs. These are just a few examples of little expenses here and there that some online business owners ignore when fixing their price and profit margins.
Treat your online business the same way you would do an offline business. Every cost should be noted. Every income should be noted. If your pricing fails to account for these, you may just be shooting yourself in the foot.
The cost of raw materials, delivery, and production is easily factored into pricing, even for online businesses. But other costs like the ones we have listed above are mostly ignored, and the narrative behind it is that running a business online does not incur expenses like rents and utilities. Don’t be misguided. There are software and applications that can help small and medium business owners reach proper product pricing. I will not mention any names here, but simple research can show you some of them. Enter the required data, and it will give you a proper price range for your product.
If you want your business to grow and scale at some point, this structure has to come in during the company’s early days. Stop waving off some little costs as insignificant and think you can cater to them from your expenses. As the business grows, you will not be able to keep up, and then you may struggle to factor them into your product pricing.