Pricing: Services & Products

Class Group Activity

First Steps: ID “The Thing”

• identify a passion, talent and/or need for service/product

• define boundaries: community, consumers

• research competition: nature, cost, quantity and quality of services/products; achievement stats

• build a new model that innovates based on distinguishing characteristics

• branding

Next Steps: Prioritizing

• timetable: realistically assess what's needed now vs. what can wait

• subdivide primary, secondary, tertiary markets, etc.

Service Pricing: Billable Hours Formula (determining hourly rate)

• 1) determine annual salary ("take home" pay)

• 2) calculate fixed costs ("overhead") - rent, utilities, phone, internet, etc.

• 3) determine profit goal, expressed as percentage (Profits are for: bills, salary, reinvestment)

Billable Hours Formula

Desired annual salary + Annual fixed costs (overhead)+ Profit goal, expressed as a percentage

÷ Your number of annual billable hours

= Your Hourly Rate

Your Price vs. Market Rate

• compare this rate with Market Rate for your market, then justify difference in cost; or, redo Billable Hours Pricing accounting for the Market Rate

• determine flexible pricing options to help reach hourly rate goal

Product Pricing

• research range of competitive rates as compared with standard of quality

• research costs from supplier

• determine markup percentage above cost and calculate price

Next Steps

• working budget

• cash flow projection

• profit/loss forecast

Share Your Findings

Sum up:

"What I've learned and how I'll use it"