ForumsAdvertising, Sales and Marketing

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