How to get paid

Getting paid involves more than just putting your products or services up for sale.

Name your price

The prices you charge for your goods or services can influence how much you sell, and how much of a profit you make.

You don’t have to be a math whiz to price your products effectively, but you do need to be thorough.

Here’s a pricing strategy called “cost-plus pricing” that works for pretty much any product or service:

Step 1: Determine the cost to create and deliver the product or perform the service

In this step, you’ll add up the raw materials, labor costs, shipping and delivery fees, and overhead expenses.

Then, you’ll calculate the expenses for each item or service to determine how much it costs you to serve your customers.

Example:

Here's a list of expenses you may have if you make custom t-shirts for local organizations and sports teams. These are called variable costs because they vary depending on how many shirts you make:

• Shirts (men’s, women’s, children’s, tank tops, tees, sweatshirts, etc)

• Embroidery thread or vinyl application

• Glitter, ribbons, and other accessories

• Labels, packaging materials

• Shipping/delivery expenses

You'll also have fixed costs. Fixed costs stay the same no matter how many t-shirts you make, such as:

• Monthly rent at the studio space you use to customize shirts

• Utilities at the studio space

• Cost to host and run your online store

Fixed costs can be more challenging to attribute to your products and services.

The simplest way to do it is to add up your fixed costs over one month and allocate them evenly across the number of goods or services you sell in an average month.

If you haven’t made any sales yet, you can divide these costs across the products or services you expect to sell in a month.

Step 2: Decide how much of a profit you’d like to make

Now that you know how much it costs to do business, you can choose your desired profit margin. This is usually represented as a percentage. For example, you may aim for a 20% profit margin, meaning you’ll want to make the price of your items 20% higher than your costs.

Here’s how this looks using our t-shirt printing example:

• It costs you $15 to print and deliver a women’s custom tee to a customer

• You want to earn 30% profit, which is $4.50 per women’s custom tee

• The cost for a woman’s custom tee should be $19.50 to cover your costs and your desired profit margin

Step 3: Check the competition

You can learn a lot about pricing your own goods and services by checking on your competitors. Do some research to get an understanding of how much people are paying for similar products.

While you’re scouting for prices, keep in mind that consumers are often willing to pay differing prices for products that seem similar.

Let's imagine that you are a skilled carpenter who makes hand-turned wooden table legs. Your custom table legs use higher-quality wood than a competitor’s mass-produced products, and they are sturdier. You may be able to charge more for your artisanal table legs than your competitor charges based on these differences.

In some cases, your products or services may be extremely similar to a competitor’s offerings.

Say for instance that you offer a basic lawn mowing service. There are no factors that make your offerings significantly different from other lawn services in the area. In this case, you may consider pricing your mowing services at a lower rate than competitors. This gives you a competitive advantage, so you can earn some new customers.

Step 4: Test and adjust

Nervous to name your prices? Don’t be! Your pricing isn’t permanent, especially when it comes to an online store. Prices can be updated easily online as you tweak your strategy.

Pay close attention to what happens to your sales—and your profits—as you adjust your prices. Watch for that “sweet spot” where your sales volume and profit margin both thrive.

Set yourself up for checkout success

As an online store owner, your earnings hinge upon the moment each shopper completes checkout, also known as the moment the shopper “converts.”

There are a couple things you can do to encourage more completed checkouts (conversions), and even higher purchase values:

Empower shoppers by offering their favorite payment methods

Different payment options can help you target different customer groups.

For example, Millennial and Gen Z shoppers want simple, convenient, and social payment experiences. These mobile-first consumers want to post about their purchases on their social media accounts, and they prefer digital payments to cash.¹ Offering Venmo can help you reach younger generations who love a simple checkout experience.

Online shoppers may also want the option of paying in installments, especially for big ticket items. In a Nielsen survey, 42% of consumers said being able to pay in installments was important to them.² Offering a Buy Now, Pay Later (BNPL) option can help close the sale with these customers.

Regardless of demographics, allowing customers to use their preferred online payment methods can help you capture more conversions.³ In a survey, 68% of customers said they will not shop at a retailer that doesn’t offer their preferred payment type.⁴

There are many more digital payment options that you can offer besides credit cards. These include peer-to-peer payment apps like Venmo, as well as digital wallets, such as PayPal, Apple Pay, and Google Pay.

Offer buy now, pay later (BNPL)

Offering BNPL gives shoppers the flexibility to buy what they need while still managing their budget. BNPL allows customers to pay in installments, while your business receives the full payment amount at the time of purchase. This increased flexibility can serve as a major factor in a shopper’s decision to purchase.

PayPal’s BNPL solution PayPal Pay Later has driven a 49% larger average order value than traditional payment options.⁵ And a Consumer Reports analysis ranked PayPal Pay Later number one for privacy, transparency, and security among BNPL apps.⁶

Make it easy for shoppers to check out as guests

Online shoppers like guest checkout. A survey showed that 51% of frequent online shoppers are more likely to use guest checkout, even when they have an account with the online store.⁷

Offering customers an accelerated guest checkout option like Fastlane by PayPal can help increase conversion. Fastlane works by recognizing millions of customers across the PayPal network and auto-filling payment and shipping information for verified guests that have opted into Fastlane.

Shoppers who use Fastlane’s auto-fill capability have been shown to have a guest checkout conversion rate of around 67%.⁸