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    • kylierae

      Business Owner

      @kylierae

      What’s the best way to price up custom packages?

      Question submitted 09/09/21 @ 04:14pm

      Kia ora team, I'd be interested in hearing the different ways in which people price up packages specifically (rather than products). I know my fixed and variable costs, then I usually add a margin to this which needs to include my time and business profit. Problem is, I have never worked out what my time is worth or how much of it goes into each package (it often varies), plus what is an acceptable level of profit margin to add? We don't have any close competition that I can do a competitor cost analysis with. Of course we have indirect competition but the final packages and value are quite different. I use a mix of adding margin to come up with a cost that sounds and feels about right to me. It's not exactly a science!! I'd love a formula, someone give me a formula!! ;)

      Category: Accounting
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      • Andrew Hamilton

        Admin

        @andyadmin

        Reply submitted 09/09/21 @ 04:14pm

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        Hey Kylierae

        Let me take a counter – you can price up your direct costs and make some assumptions around indirect costs, and then add a mark-up or margin to get to a final price that you add GST to for the client’s package. What is reasonable for margin/markup can depend on the industry. Ranges can be low 10% to high over 100%.

        Another way to price is to focus on your customer and your market, what value do they get, what experience is it ie is it functional e.g. cleaning or is it highly differentiated and of high satisfaction to the point that you want to work out ‘what is this experience worth’ to your target customer – if you can work this out or a range, then you can compare that to your direct and indirect costs to come up with what the margin is on that.

        I always think it is way easier to go cost-up than it is to go value back to cost.

        Not sure that this helps?

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        • kylierae

          Business Owner

          @kylierae

          Reply submitted 09/09/21 @ 04:14pm

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          Hey Andy – you’re a machine! Thanks for answering both my questions. Yes this makes sense to me and is helpful. I’d say I’ve been taking a hybrid approach from both of these methods you’ve outlined. Which is probably why I’ve found it so hard! Pretty tricky to try and figure out the value back to cost when you’ve got very few points of reference. So I’d lean towards the cost-up but trying to determine what margin percentage is also hard. For example, on a residential house build, a standard builders margin is 5-10%. Wish it was a bit more black and white for our industry situation!

          If I decide on a set margin. Let’s say 40%. Of course I’m going to make more with larger groups and less with smaller groups – I guess that’s just something to factor in?

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        • Andrew Hamilton

          Admin

          @andyadmin

          Reply submitted 09/09/21 @ 04:14pm

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          Morena – perfection is mastered by making small steps every day, not answering 100% every day, you will never get to 100% – just be very hypothesis and action focused with some learning – so just do it, after thinking about it, and be prepared to adapt and learn as you go.

          Sorry I don’t have more clarity for you.

          Funny article this one – you will know what it is like to do a startup, some times in a cavern of quietness (as you work inside your head) and then the No’s come – and you are like ‘give me quietness instead of another no’

          the funny thing sort of – is that no’s help you get to yes’s
          https://medium.com/@ppz12985/founders-second-rule-become-the-king-of-rejection-b81a6599131b

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      • Sjackson3289

        Business Owner

        @sjackson3289

        Reply submitted 09/09/21 @ 04:14pm

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        hi

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