Tag Archives: market

Solving the Pricing Riddle

Posted on November 14, 2011 by Lauren Folino

Dear Norm, In October, I parted ways with my former employer. I have decided to start my own business creating mobile websites and apps for businesses. The trouble is, I have no idea how to set pricing. My overhead is $7,044 a month, and it takes me about two weeks to develop each website or app. I have one client, a friend of the family, whom I charged $500 for a huge website, which I know was too little, but I’m worried about losing customers by setting my rates too high. Then again, I need to eat! What do you advise? Kate McGinley, founder, McGinley Media Pittsburgh Everything has a price, as the saying goes, but a lot of people struggle with figuring out what the right price is. I get more inquiries about pricing than about any other subject. The classic mistake is the one Kate was about to make: setting a price based on what she feels she needs to earn rather than on how the market values her service. Competition generally determines the price you can charge. So the first step should always be to find out what competitors are charging. There are many ways to do that. You can call up other providers and — posing as a customer — get estimates. Local, state, or national trade associations may also provide the information you’re looking for. If all else fails, you can follow my father’s advice, which he gave me in the form of a humorous story: A brand-new optician opens up a store and isn’t sure what to charge. On the first day, he gets his first customer, who looks at some glasses and asks how much they cost. “Uh, $20,” the optician says. “$20?” the customer responds. “That’s all?” “Well, that’s just the frames,” the optician says. “The lenses are extra.” “How much?” the customer asks. “Uh, $15,” the optician says. “Only $15?” says the customer. “Per lens,” says the optician. “Oh,” says the customer. “So that’s $50 altogether.” “Well, the case is $5 extra,” says the optician. “Hmm, $55,” says the customer. “That’s a little high, but I’ll take it.” I’ve used this method, and it works. But whatever approach you take, the rule is the same: You don’t set the price; the market does. Your job is to determine what the market will pay. Then you can decide whether it’s enough to cover your costs and fund your lifestyle. If you do it the other way — starting with your own financial needs — you’re likely to wind up charging too much or too little. And charging too little is even more dangerous than charging too much. If you set your prices too high, you can always just reduce them. But if you undercharge, you develop the wrong kind of reputation. I told Kate, “You don’t want people saying, ‘Let’s use Kate McGinley. She’s cheap.’ It’s a lot better if they say, ‘Yes, she’s a little expensive, but her quality is worth paying for.’ ” Please send all questions to AskNorm@inc.com . Norm Brodsky is a veteran entrepreneur. His co-author is editor-at-large Bo Burlingham. Their book, The Knack, is now available in paperback under the title Street Smarts: An All-Purpose Tool Kit for Entrepreneurs. Next Question Business – Optician – Customer – Entrepreneur – Pricing Continue reading →

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Start-Up Seeks To Outflank Google In New Market

Posted on November 9, 2011 by

Start-Up Seeks To Outflank Google In New Market Continue reading →

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The Return of the IPO

Posted on August 5, 2011 by Nitasha Tiku

The IPO market, moribund for nearly two years, is finally warming up. From January to May of this year, 52 companies sold shares in the public market for the first time, compared with only eight in the same period last year. Another 106 companies intend to go public later this year. But there are some important differences this time out. The speculative froth is clearly out of the market, with investors demanding much lower prices than in previous waves of IPOs. The good news for entrepreneurs is that an increasing number of investors are favoring venture-backed fast-growing start-ups over the more established but highly leveraged companies that had been in vogue, says Kathleen Smith, co-founder of Renaissance Capital, an IPO research firm. That’s why today’s crop of IPOs looks a lot like the universe of Inc. 500 companies — fast-growing tech businesses, a smattering of financial services firms, and a few entertainment and consumer companies. Here are five promising up-and-comers that are hoping to go public this year: REALD If you saw Avatar on the big screen, then you have used a RealD product. Co-founders Michael Lewis and Joshua Greer made a bet on 3-D after working together in Creative Artists Agency’s digital media lab. The Beverly Hills company licenses proprietary 3-D technology for use in games, movies, and consumer electronics. Last year, its technology was used in films that accounted for 75 percent of the total domestic 3-D box-office receipts. But it also faces big-name competition from Dolby, IMAX, and others. Skeptics aren’t certain RealD can repeat the huge boost the company enjoyed from Avatar, which helped push the company’s revenue to $189 million for the fiscal year ending March 26, 2010, up from $45 million in 2009, a 324 percent growth rate. Hoping to raise: $200 million BECEEM COMMUNICATIONS The Santa Clara, California, company designs and develops 4G chips for the next generation of mobile wireless devices. In 2009, the company shipped more than 2.5 million chips designed with WiMax, one of two technologies vying to become the standard for 4G. It is also developing chips using LTE, the other G4 technology. Revenue jumped 214 percent, from $14 million to $44 million, in 2009, but the market is competitive, and one customer, Motorola, makes up 51 percent of the company’s sales. Hoping to raise: $100 million QLIK TECHNOLOGIES Big corporate clients such as Qualcomm and Kraft use analytics software from Qlik Technologies to visualize data such as sales trends and cash flow. Qlik, headquartered in Radnor, Pennsylvania, got an early edge in business intelligence software with in-memory technology, which processes data from a computer’s memory rather than from disk storage. But as more software makers adopt in-memory technology, the company may have trouble maintaining its 33 percent growth rate. Hoping to raise: $100 million GAMEFLY Sean Spector and Jung Suh couldn’t find an online video game rental service. So, in 2002, they co-founded, with Toby Lenk, what is often called the Netflix of video games. The Los Angeles company is backed by Sequoia Capital, which also invested in Apple, Oracle, and YouTube. Gamefly, the largest video game rental service in the U.S., had revenue of $85 million in 2009. The company rents its 7,000 titles to more than 380,000 subscribers. But Blockbuster and Netflix have signaled interest in the market. Hoping to raise: $50 million ZIPCAR Membership for Zipcar’s swipe-and-go car-sharing service is more than 400,000 strong. Scott Griffith, a former Boeing executive, signed on as CEO in 2003, but the company has continued to lose money. Some of the IPO’s proceeds will go toward paying down the company’s debt. Still, Zipcar has the lead in the market for car sharing in North America, which could grow to $3 billion by 2016, according to one estimate. Hoping to raise: $75 million Sequoia Capital – WiMax – Initial public offering – Business – YouTube Continue reading →

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