How to Set a Sales Price – LEARN MORE
The formation of the Sales Price is extremely important for all companies and must be considered with great care and knowledge.
There are two basic ways to set prices:
- Get the price practiced in the market and adjust your price to the same levels, defining whether you will work above, at or below the average. Be careful when doing this, as it will not always be profitable for your company, or it may be too expensive for the market in which you operate.
- Calculate Costs and Margin. This is the best method, because then you will clearly know how much it costs, how much tax you pay, how much is used to pay sales agents and the desired margin. In this case, there will certainly be a profit.
It should always be remembered that despite calculating your selling price correctly, you must check whether this price is appropriate for your market segment and the quality of the product being delivered, otherwise it may decrease your sales.
I provided Strategic Mentoring to a family business, and when I got there I came across a serious pricing problem. The company had a service provision contract with a large corporation, and provided the services exclusively, however, this large corporation was placing intermediary agents to manage its budget, incurring additional costs to suppliers, in addition to extending the payment term from 30 days to 180 days, forcing them to discount the duplicates at the bank.
In addition to this, because they focused on providing the service and not on managing the business, they neglected to review prices and, at that time, prices were out of date by more than 40%.
Dangerous situation in sight!
Luize Consulting (now Instituto Reddere) created spreadsheets to calculate costs and sales prices so that they could renegotiate with the client. We later trained the company's team to perform these calculations periodically, thus avoiding new financial imbalances.
I provide a template spreadsheet similar to the one used to meet the needs of companies that sell products and services.
It has a tab called “Monthly Service” to calculate the hourly price to be charged for a monthly service per ton, in the “Hourly Service” tab the calculation for selling the service per hour, in the “Service 1 DRE” tab the demonstration of the calculation for 1 (one) full year and in the “Fixed and Adm. Costs” tab the table containing all the costs of the operation.
I hope you find this information and the spreadsheet helpful.
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