Do your prices cover your costs? Unfortunately, many entrepreneurs don’t know for sure.

It’s common for small businesses to price their products and services based on what competition is charging. But that could be a mistake.

It’s important to know all your costs and your desired return on capital, and to take these into account when you set your prices. It isn’t necessarily bad for your prices to be higher than those of your competitors. In fact, this is perfectly appropriate if your strategy is based on differentiation – offering a unique or specialized product.

A growing number of businesses use estimating software to take the guesswork out of making job bids that better reflect their costs. The software takes into account overhead costs, the price of material and other expenses as well as your targeted profit margin, ensuring that every job is profitable.