Skip to main content

Avoid making this mistake when setting prices


When it comes to setting prices one thing we all seem to understand is that we need to add a markup to our cost. While this may seem easy, many small business owners take it at face value. e.g. I bought this for $5 so if I sell it at $10 I'm making 100% profit. 


While that's a good start, it is not the end. They are making one critical mistake: 


ignoring their fixed costs


- and as a result, they undercharge.


That's because most small business owners will tell you they don't take a salary or they understate their fixed costs.


I work from home so I don't pay rent


but at the end of the day, you still need to live, don't you? 


Examples of costs that small business owners ignore

How much do you deduct from your business for:


• lunch

• airtime

• the electricity you use to bake

• water

• transport

• the money you gave your helpers to 'buy a drink'

and so on. 


These amounts may seem inconsequential but over time they become significant... and they need to be factored into your product price.


So going back to our example- that extra 5 bucks you added as markup is your gross profit(or margin) and not your net profit.


Are we together? #YourMathsTeachersVoice


 A failure to understand this will result in you doing a perpetual balancing act to stay afloat, while you wonder how your business continues to struggle yet it seems 'profitable'. That's because you'll be losing money but you're oblivious to it.


The product cost calculator

A screenshot of the product cost form



There's a simple method you can use to calculate your break even cost and this will tell you whether your business or a product is profitable.


The logic is that every item should contribute a certain amount to your fixed costs i.e. your rent, salary, licences and so on. 


We've created a free online tool which you can use to help you calculate your fixed cost charge(i.e. the percentage that each product should contribute to your fixed costs). This simple tool will also show you your break even price for a specific product. You don't need to download anything, (unless you want to).

Please check it out by clicking the link below:


Open the product cost calculator


and remember... If you like it then you should put a share on it.


As always, I wish you all the best,


Love, Likhwa

Labels:

Comments

Post a Comment

Popular posts from this blog

Hip hop and RnB songs to apologize to your partner

Love is a beautiful thing, but it often goes wrong. This often leads to pain, suffering and sorrow.  Being imperfect beings, hearts tend to get broken all the time regardless how hard we may try to avoid it.  The heartbreak is often inadvertent but at times we find ourselves in the wrong. An oversight, a word unsaid or even a lapse in our judgement can cause our loved ones harm. This doesn't always have to be the end though. Oftentimes, relationships can be mended by simply uttering three simple words: "I AM SORRY". This article is a collection of some of my favourite 'I'm sorry' songs. I hope you'll enjoy these apology songs, but more importantly, I hope you will get a few quotables and some wisdom nuggets from them.  The best apology however, is to change behaviour (got that from a Jay Z interview) so as you apologize, please remember that it was your actions that hurt them. The best apology is one which involves you not repeating those same mistakes aga
Post a Comment
Read more

Php date: How to get the first and last day of the week

In this tutorial, I'll show you how to get the first and last day of the week in php. By default, in PHP the week runs from Monday to Sunday. However we'll cover two methods to get the first and last day for both those who consider Sunday or Monday as their first day of the week. We will be using 2 functions to achieve this: date() strtotime() We will use a combination of these two functions and store the result in a variable.  How to get the first day of the week If you want to get Sunday, use this method: $firstday = date('l Y-m-d', strtotime("sunday -1 week")); echo $firstday; If you want to get the date for Monday, this current week, use this method: $monday = date('l Y-m-d', strtotime("monday -1 week ")); echo $monday; How to get the last day of the week The following code will give you Saturday as the last day of the current week. $lastday = date('l Y-m-d', strtotime("saturday 0 week")); echo $last
Post a Comment
Read more

How to easily create background notifications in Sketchware(original)

How to easily create background notifications in Sketchware(original) One of the keys to building a successful app is to find mechanisms that will keep your users engaged. You can do this by using background notifications. This tutorial will show you how to do that in Sketchware. We will cover: 1. How to create notifications in Sketchware 2. How to show these notifications even when the app is closed.
7 comments
Read more