Four Pricing Methods

“Money is better than poverty, if only for financial reasons.” — Woody Allen, comedian, screenwriter, and director

Key Ideas:

There are four ways to support a price: replacement cost, market comparison, discounted cash flow/net present value and value comparison.
The Replacement Cost method answers the question: “how much would it cost to replace?” figure out how much would it cost to replace, add your desired mark-up, and set your price.
The Market Comparison method answers the question: “how much are other things like this selling for?” Find a similar offer, and price yours accordingly.
The Discounted Cash Flow (DCF)/Net Present Value (NPV) method answers the question: “how much is it worth if it can bring in money over time?” The more profit the business generates each month, the higher the price.
The Value Comparison method answers the question: “who is this valuable to?” This is typically the best way to price your offer, since its value to a specific group can be quite high, resulting in a better price.