Computing Prices for New Business

Selriel By Selriel, 27th Nov 2015 | Follow this author | RSS Feed
Posted in Wikinut>Business>Starting A Business

What if you're a new business owner and don't have experience to base your prices on?

Computing Markup

As you start on new business, prices are more difficult to compute. You need to research on material cost by getting quotes from suppliers of lateral industry and study labor rates in the area.

Computing markup is often confused with computing gross profit margin. Both computations deal with same variables. The difference is that gross profit margin is figured as a percentage of sales price, while mark up is figured as a percentage of cost. Hence, markup is computed as follows:

Markup Percentage = (Sales Price - Cost ) / Cost

On the other hand, computing last year markup help on setting benchmark for your business. Computing markup on individual jobs will make difference in running profitable operation. In calculating for each job, you must carefully estimate variable cost associated with it. To arrive at price quote, you must identify your desired markup. To find price quote:

Price Quote = (Desired Markup x Total Variable Cost) + Total Variable Cost

Tags

Business, Business Prospects, Compute Prices, Cost, Price, Selling Price

Meet the author

author avatar Selriel
An accountant who is fond of writing poems.
I love being a writer, it gives us the opportunity to tell stories, to create a character, to design a situation and be God of our own writing.

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Comments

author avatar SaigonDeManila
1st Dec 2015 (#)

Very informatve and great reminder f most f us who are not into business.

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