You have a brand new at home business, and are offering a service or product for the very first time. You have never had a customer, have no positive feedback, and no reputation to draw on in business. What's more you may have little in the way of examples of your work (portfolio) to show to potential customers. How do you decide how much to charge for what you are offering?

Charge too little and you won't recover your costs, or make it worth your time investment. Charge too much and any potential customers will go elsewhere, to the cheaper, comparable competitive. So where do you start?

A good place is to look at the materials that go into your product(s). Any material costs must be recouped, or else you will be unable to buy more to continue your product manufacturing. This means everything from fabric and wood to threads, needles and glue.

Then comes your time. Within reason you would hope to be paid a reasonable hourly rate, however this may not work out when you first begin. When you are still polishing up your skills, you may find that you take longer than is strictly necessary to complete each piece, and it is unfair to pass on these extra costs to the customer who, if they waited six months may get the same item for less, and at a higher quality thanks to your improved experience.

This is where checking out the competition comes in, and the same process applies to deciding how to price a service that you are offering, rather than a product. It is unlikely that whatever you are planning to do is entirely unique. Search for other businesses offering similar items or services to what you plan to offer. Once you find them, either online or in your local area you can compare their products to yours and see what they are charging. If what they are charging seems to barely cover your material costs, you may need to look into alternative materials or suppliers.

Setting your prices close to theirs will help ensure that you do not price yourself out of the market giving you a chance to compete with other similar businesses. What this doesn't do is give potential customers a reason to try your products or services for a change.

The need to win customers may mean that to begin with that you need to cut your price to the bare minimum. Though your profits will be lower you will be gaining both customers and valuable experience, making this almost like an apprenticeship or training period. After a short period of successful operation, perhaps decided by the number of customers you have served or items that you have sold, you can increase your prices to a more normal level for the market you are in and the products and services you are offering.

There are no firm set of rules for you to follow when it comes to deciding what you are going to charge, but it is often better to start on the lower side and increase to match the competition as your experience grows. This way you have a reasonable chance of gaining customers and experience at the same time.