Home: Message List - Pricing for Profits ~ Best Stratgies

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Mon, 16 Mar 2009 02:25:23 GMT

Alex,

I really appreciate your insight. I'll check out the blog. I did miss the insurance and other fees.

Re: Pricing for Profits ~ Best Stratgies

Analysight — Fri, 13 Mar 2009 01:50:38 GMT

Msbeautyceo,

Not to beat a dead horse, but I've just added a two-part post to my blog, Insight Central, on how to determine the optimal price point. Please check it out at: www.analysights.wordpress.com

Re: Pricing for Profits ~ Best Stratgies

Analysight — Thu, 12 Mar 2009 00:27:16 GMT

You can do either or both. In fact, it might be good to do both an annual and a monthly forecast, especially if your products are seasonal.

In your fixed costs, don't forget your insurance (all kinds - health, liability, property & casualty), your bank fees, accounting and legal fees, equipment leases, interest on loans, etc. Any cost that remains more or less the same, regardless of how much you sell.

In your variable costs, be sure to include anything that is affected by the volume of your sales - the cost of packaging them to send, hourly wages you pay for help in fulfilling orders, etc.

Your math is correct, and yes, every unit above 22 (assuming your volume is the same each month) is profit. Indeed, the difference between your selling price and your variable cost is your unit contribution margin. Hence, each unit above 22 adds - contributes - $38 to your profit.

Interestingly, you mentioned that your marketing research proved your existing customer base was unwilling to pay the kind of price you wanted to charge. Analysights has solid expertise in marketing research, pricing, and sales forecasting. I would be happy to give you a FREE hour of consultation via the phone and web to determine whether your marketing research gave you the right information. I'll also sign a non-disclosure agreement. You can find my e-mail address on my website at: http://analysights.com/default.aspx.

Have a great night!

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Wed, 11 Mar 2009 16:12:16 GMT

Alex,

Do I calculate this annually or monthy?

Let's say the

TFC for the year is 10,000
rent
phone
web
ecommerce
vending
stamps software
virtual receptionist
print online ads

Optimal pp is 65.00

Unit VC is 27.00 (wholesale product 15 graphic design 3, copywriter 5, shipping cost 3, marketing materials brochure, card etc 1, )

10,000/(65-27)=263 units

So let's say 22 units per month to break even

Is anything after 22 if all profit?

Can you think of fixed or variable cost the I may have overlooked?

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Wed, 11 Mar 2009 15:38:57 GMT

I have done market research and I have found that my current client base is not willing to pay a high enough price for me to be successful. That is why I am changing my image/positioning/stratgies etc.

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Wed, 11 Mar 2009 15:36:56 GMT

I am sorry Alex. I did not see your full post.

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Wed, 11 Mar 2009 15:31:33 GMT

Thank you very much.

So

1 set the pricing

2 do a sales forcast

3 then set a budget

How do I determine true profit this way?

Can you clarify the steps?

Thanks again

Re: Pricing for Profits ~ Best Stratgies

Analysight — Wed, 11 Mar 2009 00:38:23 GMT

Msbeautyceo,

Setting your price first and then your budget - a process known as "price-driven costing" - is the way you should do it. Doing it the other way around - "cost-driven pricing" - opens you up to problems, as competitors whose cost structures are lower can eat into your sales and your margins.

Your first step should be to conduct some market research - a brief survey - to determine the optimal price point your target customer segment would be willing to pay. (I've written about this in greater detail in another post in this forum - "Can you charge too little for services" by pdmiller).

Once you have determined your optimal price point, you need to get the following information: your total fixed costs: the costs that stay the same, regardless of how much you sell (rent, insurance, equipment, etc.); your variable costs: the costs you incur with each unit change in what you sell. These would include the cost of each unit of the cosmetics you sell, shipping, production, etc. Divide your variable costs by the number of units you expect to sell.

Using these numbers, perform a breakeven analysis. Compute your breakeven point as follows:

*Breakeven point = Total Fixed Cost / (Optimal Price Point - Unit Variable Cost*).

If, for example, your total fixed cost was $10,000, your optimal price point was $50, and your unit variable cost was $25, then your breakeven point is: $10,000/($50-$25) = 400 units.

Msbeautyceo, if I can answer any further questions for you, please let me know. I wish you the very best.

Alex

Re: Pricing for Profits ~ Best Stratgies

msbeautyceo — Tue, 10 Mar 2009 19:41:03 GMT

My accountant and business coach both reccomended it. I have only used my accountant for taxes. Thank you

Re: Pricing for Profits ~ Best Stratgies

LUCKIEST — Tue, 10 Mar 2009 17:38:52 GMT

Pricing for Profits ~ Best Strategies, Welcome

Who are you?? Where are you?? Tell me more. How long have you been in business??
Do you have an Accountant?? Do you use spreadsheets to keep track of Sales?? Product?? Costs??

Let's say I buy a product wholesale at $10.00 how do I know how much to
mark it up and how much of the mark up is profit after expenses are
paid ( web hosting, graphic design, virtual receptionist, everything). That is why you need an accountant, a spreadsheet etc.

How can i contact you?? I can help you make a profit

Talk to me, LUCKIEST