business processes slide 1 introduction to business processes for web developers rhys parry
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Business Processes Slide 1
Introduction to Business Introduction to Business Processes for Web DevelopersProcesses for Web Developers
Rhys Parry
Business Processes Slide 2
Costs and PricingCosts and Pricing
What is the difference?– Costs
• What it costs YOU to deliver a product or service
– Price• Is what your CUSTOMER pays
Business Processes Slide 3
CostsCosts
Purchase costs– Raw materials– Equipment Costs
Costs of Finance– Interest Payable or Lost
Direct Labour Costs– Salaries– Pensions
Overhead Costs– Premises, Admin, Sales & Marketing– Not attributable to projects
Business Processes Slide 4
Costs of Running a CarCosts of Running a Car
Cost £10,000Run for 3 yearsSell for £4,20010,000 miles per year
Business Processes Slide 5
Cost of Running a Car …..Cost of Running a Car …..
Fixed Costs:
Depreciation 5800
Loss of Interest 927
Car Tax 475
Insurance 1500
Total Fixed Costs
8692 28.97p/mile
Variable Costs:
Petrol 3300
Servicing 300
Total Fixed 3600
TOTAL COST 11292 48.97p/mile
No Inflation
Business Processes Slide 6
Costs……Costs……
Fixed– Premises– Administration– Sales & Marketing– Costs of Finance
Variable– Raw Materials– Direct Labour Costs
Business Processes Slide 7
Fixed & Variable CostsFixed & Variable Costs
Production Units Can Have Fixed Costs– Independent of Sales– Magazine Publishing– Toy Manufactures– Software Development
Business Processes Slide 8
DepreciationDepreciation
Need to know value of Equipment and StockToo costly to revalue every ItemSimplified:– Straight Line– Reducing Balance
Must be Consistent and Used & Declared in Annual Accounts
Business Processes Slide 9
Straight Line DepreciationStraight Line Depreciation
Year Depreciation End Year Value
1 2000 8000
2 2000 6000
3 2000 4000
4 2000 2000
Business Processes Slide 10
Reducing Balance DepreciationReducing Balance Depreciation
Year Depreciation End Year Value
1 3000 7000
2 2100 4900
3 1470 3430
4 1029 2401
Business Processes Slide 11
Reducing Balance……..Reducing Balance……..
Need to Identify Classes of EquipmentComputers – High depreciation rateBuildings - Low rateCars – Medium rateFurniture – Low rate
Business Processes Slide 12
Labour CostsLabour Costs
Salary plus on costs:– National Insurance– Pensions
Persons Day rate– Statutory & Ordinary Holidays– Sickness– Training– Idle time– Unchargeable Time
Business Processes Slide 13
Staff CostsStaff Costs
Total Work Days 260Junior Staff – 220 Chargeable daysSenior Staff - 160 Chargeable days
Junior on £20,000– Cost £24,000 (No overheads)– Overheads £24,400– Cost per day = £220 per day
Business Processes Slide 14
Overhead CostsOverhead Costs
Not Attributable to Particular project– Building Costs– Administration
• Personnel• Finance• Sales & Marketing• Support
Fixed Costs and are very Real!!Computer Industry– 100% Small Company– 200 – 250% Large Company
Business Processes Slide 15
PricingPricing
Business Processes Slide 16
Pricing in the Computer IndustryPricing in the Computer Industry
Cost Plus ServicesFixed priceProducts
Business Processes Slide 17
Cost PlusCost Plus
Agree with Client your Costs per day– Usually on Direct Labour– Overhead
Agree Profit margin“Body shopping”Unsuitable today for projects
Business Processes Slide 18
Fixed priceFixed price
Total of:– Direct Labour– Bought in Items– Indirects
Profit addedUsed in Competitive TenderingRisks versus Profit
Business Processes Slide 19
Software Product PricingSoftware Product Pricing
Marginal Costs Very Low– Manual, Box and CD Rom < £10.00
Large Development Costs
Sales proportional to marketing
Sales fall with increasing price
Business Processes Slide 20
Customer ExpectationsCustomer Expectations
Price Nature (Low to High)
Free Shareware etc. Some great products (Winzip)
£20 Buyer’s Risk – Internet Sales
£100 -£500 High volume - Real Software – Microsoft, Macromedia, Adobe
£10,000 Real product – low volume – Bugs and Support
£100,000 On the drawing board!!
Business Processes Slide 21
Support and other IssuesSupport and other Issues
Large percentage of income– 10% - 25% of turnover– Sage, Microsoft
Support & UpdatesMust be Real and Valuable
Annual Licence fee chargesPer use ChargesApplication Service Providers
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