Pricing for the Holidays a Business Accounting Solution
Holiday season and sales are everywhere! I think most of us are familiar with the shopping season starting way too early. Sales usually attract more people. Attracting more people is great, however, it should not be at your expense. Avoid cutting prices too low. A sales price that is too low will create a loss and attract the wrong type of customer/clients. These clients/ customers are only looking for a low, low deal and do not care for quality. This is great if your business model is to be known for the lowest prices.
There is a challenge for business to be the lowest priced and high quality. Usually, businesses have to focus on one or the other. We have to select high quality or lower price because of the makeup of the product or services. A higher quality calls for a higher cost to make or create the product or service. A lower price is usually a result of lower quality. The make-up of the lower priced item/service required little or no cost to the seller. Understand, that does not guarantee every high priced item or services is high quality. Unfortunately, there are some very unethical individuals that markup cost on a cheap item to make people think they are getting quality.
Selecting quality products and services is another discussion and I will give you more tips on how to select quality items and people on my next blog. Today, let’s talk about how to calculate pricing for your sales.
Perhaps, you would like to offer a sale without breaking the bank. Here’s a simple formula you can use to determine your pricing.
determine the time it requires for you to make the item or create the service. Convert the time to dollars. Example: We will use the total time of 1 hour required to make it and the price of your hourly rate if your hourly rate is $45 per hour. $1*$45=$45. The time cost is $45 that you invest in the product. This creates a value of $45 minimum, so far.
the cost is the amount it will require you to invest in the purchase of the items needed to create the product or service. Example: Let’s use the cost to create the item is $25.00.
The cost of doing business
You will have to include the cost for you to be in business. That means marketing, shipping to receive your materials, overhead and any other cost needed to create the item – $5.00 broken down by item.
Your total cost to create the item or service is $75.00. Where is the profit? Calculate the profit and taxes by including a markup of maybe 20%. Your actual price to sell the product or services should be $90. However, you sold the item for $35.00. If you complete this cycle for the entire holiday season you have paid the customers to take the product/services. Count the cost prior to creating a sale.
A better option would be to price the item at $125.00 and then sell it for $90 on special sales events. You will make a higher profit for the items that sell at the $125 but more importantly, you will make a profit even on sales. Also, think about not offering a sale, you will show you offer the best prices every day! Not just special events. Leaving the pricing at $90.00. You will make a profit and cover expenses.
Have a wonderful holiday season and blessing to you and your business!
If you would like to talk more about how to set your pricing for the holiday season…grab a free money saver conversation with me. We will also brainstorm about how to cut cost to create more money for your business to prepare you for sales seasons and special offers without breaking the bank!