The 3 Most Common Horse Business Pricing Mistakes

One of the biggest challenges for any horse professional is setting prices. It doesn't matter whether you are just getting started or if you have been in business for years, it can often be hard to know if you are charging too much or too little.

Finding that right balance between the two can mean the difference in a successful business and one that struggles to stay afloat no matter how hard you work. When it comes to pricing, here are three mistakes you should avoid.

1. Trying to Undercut the Competition - While it is a good practice to know what your competitors are charging, basing your own prices on those numbers could be very harmful your business.

First, if you solely base your prices off what others are charging and don't have a good idea what your profit margins are, you run the risk of losing money. This can be true even if you are showing a seemingly healthy income on paper (remember a high income doesn't always equate to profitability).

Second, having the lowest prices rarely works unless you are able to do enough volume to offset the low profit margins. More volume for horse businesses means more work and even more expenses (labor, taxes, etc.). The idea of offering better service at a lower cost certainly sounds good, but the reality is that you often end up taking on more work for so little money that ultimately it just isn't worth your time. This can lead to burnout and unhappy customers in the long run.

Finally, you don't want your customers choosing to do business with you just because your prices are the lowest. Why? Think about what would happen if a riding student came to you because you had the cheapest prices, then a month later, a new instructor moves to the area and charges even less than you. If you've only attracted those students because you were the cheapest, it is likely they switch to the new, cheaper instructor at the first chance. However, if you position yourself as a top instructor who can help your students excel quickly to the next level at a reasonable price (not necessarily the lowest), those students are more likely to stick around even if your competition lowers their prices. This is because you have sold them on the value you can offer them beyond just a low price.

2. Not Taking All of The Costs into Account - When calculating the cost of doing business, we might not take all of our expenses into consideration. For instance, we generally include the cost of hay, grain, shavings and labor for each boarding or training horse when we calculate our cost per customer. However, there are other expenses that should also be included, such as insurance, property taxes, marketing, utilities, phone, repairs and improvements that go into maintaining and growing your business and a slew of other one-time or small reoccur fees that can add up to a considerable amount. Make sure you are taking all of these expenses into account when you are determining your prices.

3. Pricing on Cost Versus Value - It is important to know the costs of doing business in order to form a baseline for your pricing. However, if you only base your prices on how much it costs you, you could be missing out on additional revenue and maybe even hurting your marketing and branding. For instance, if someone were to compare training rates at one barn versus another and all they had to go on was price, then the best price would win. The fact is that most of us tend to base our decisions on the value of the service while taking in the consideration of the price.

This is why companies such as Starbucks, Apple and Mercedes can charge a premium price for their products. Sure Starbucks costs to produce an average cup of coffee might be slightly more than say McDonald's, but it's safe to say Starbucks' profit margins are much higher. The two companies offer a different value set to their customers. One relies on volume and low prices; the other relies on creating an atmosphere that appeals to the higher end customer. There is room for both in the market and both are profitable, it's just a matter of how you want to position your business.

This is why it's important to have a very strong value proposition and to incorporate it into your marketing efforts. A value proposition describes the customer's needs; the solution you offer that addresses these needs, and the value of this solution from the customer's point of view.

Avoiding these three common mistakes when setting or changing your prices can go a long way in helping your horse business stay healthy and grow.  However, the real key successful pricing comes down to knowing how to develop a pricing strategy that works for your specific business. 

This is exactly what we cover in our webinars "Horse Business Pricing Strategies."  and - "Horse Business Pricing for Profits and Career Goal Achievement."

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