SERVICE AND PRODUCT COSTINGS

Just because you are making sales does not mean that you are making a profit. When last did you review your pricing? Do you know what your monthly and annual breakeven sales figure is?

Services and product costing is the process of determining the total expenses involved in the creation of a product or the delivery of a service including all direct and indirect costs.  Many smaller business owners make the mistake of not factoring in profit, annual overheads, replacement of assets and a market related salary for themselves in their service costings or product costings.

When last did you review your pricing strategy?  There are three basic methods of pricing your products and services that depends entirely on the type industry that you are in: cost-plus, customer based and competition-based pricing.

The optimization of pricing strategy is as important as the management of costs and the growth of sales volume. It’s not uncommon for smaller business owners to skim over pricing. They often look at the cost of their products, consider their competitor’s rates, and tweak their own selling price by a few rands. While your cost of sales and competitors are important, they shouldn’t be at the centre of your pricing strategy. Pricing strategy should take into consideration the value you provide – what makes you better, more special and different where you can take a strategic advantage and competitive edge over other players in your market?

The best pricing strategy maximizes your profit and revenue.