Lisa Liberatore presents on pricing to small-business management class
The success of a business depends in large part on pricing a product correctly, associate professor of entrepreneurship Jason Harkins told his small-business management class.
“Pricing is your method of ensuring that your company makes money,” he said. “Setting a price on a product or service not only highlights the tangible values we hold about who we are and what we sell, it’s also the most direct mechanism we have for communicating with our customers.”
After explaining several types of pricing strategies, such as adding a specific dollar amount markup to the cost of a product; establishing perceived value to the customer; and setting a price based on the competitive environment, Harkins invited restaurateur and UMaine alumna Lisa Liberatore ’03, ’05 to speak about how she set prices at Lisa’s Legit Burritos, the Mexican-style eatery she founded in Gardiner, Maine, nearly five years ago.
Using a combination of those pricing strategies worked best for her, Liberatore told the students. To determine how much to charge for her burritos, quesadillas, nachos and hot dogs, she talked with prospective customers, assessed the competition and aimed for a 30 percent markup.
After sharing a sample menu with potential customers and learning she was within the ideal price range, Liberatore said she then went on a statewide quest to find every restaurant similar to hers.
“I tried the food, evaluated portion sizes and studied menus and prices,” she told the class. “I found a food distributor, developed a menu and determined all the things that would affect my bottom line, such as the cost of ingredients, electricity, labor, advertising and workers’ compensation insurance, as well as repairing and replacing equipment.”
She then calculated what prices the market could handle and adjusted portion sizes when her profit margin was low, she said.
“But ultimately I realized that my priority was keeping customers happy and that I preferred giving generous helpings over generating larger profit margins,” she continued. “While I like working with a 30 percent markup, sometimes I change one or two items and bump something 10 cents to give myself some breathing room.”
Every six months, Liberatore said she reassessed her prices because the cost of food is “very volatile.”
Liberatore also serves as the regional program coordinator of Top Gun, an entrepreneurial accelerator program offered by the Maine Center for Entrepreneurial Development, University of Maine and Maine Technology Institute.
The founder and former owner of Baxter Tea Company in Gardiner said
she relied on her previous pricing experience to determine what to charge at her restaurant.
Also helping her develop prices were representatives from a local food distributor. They sat down and examined the elements that went into every item to understand the true cost and assess the viability of a Mexican restaurant in central Maine.
“I knew my business idea had potential, but my goal was to figure out if it was worth putting money into,” said Liberatore, who previously served as program manager of Scratchpad Business Accelerator, a collaboration between UMaine and the Maine Technology Institute.
Since opening Lisa’s Legit Burritos in Gardiner, Liberatore has opened two more locations in Augusta, Maine, and Kingsport, Tennessee. While she manages the Gardiner restaurant, the other sites have different owners who operate under a licensing agreement with her.
Liberatore said she enjoys the restaurant business and knowing that she is bringing “fast, fresh Mexican food” to central Maine.
“I’m thankful for every customer,” she said.