While many factors determine the long-term success of a business, one important element of a business plan is setting the price for the products or services offered to customers. At a minimum, the revenue derived must cover fixed and variable expenses for overhead, cost of goods sold (if applicable), and in the case of a sole proprietorship, generate a sufficient net income from which to earn a living. Similarly for a corporation, revenues must allow for paying sufficiently skilled people who are able to support themselves by working as employees for this business rather than finding work elsewhere.

While these criteria are relevant to the entrepreneur, they have absolutely no bearing on the interests of the customer. The customer’s sole interest lies in whether his or her purchase yields good value.
Continue reading →