Pricing Calculator

Use this calculator to determine the cost-based price of a product or service.
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One of the most common questions for entrepreneurs starting a business or creating a new product or service is: "how much should we charge?" There is no easy answer. However, there are some guidelines. Firstly, there is a minimum price, below which you will make insufficient profit. That is what this calculator will help you determine.

Once you have this figure you can decide where on the spectrum of pricing you will aim to be. The better you can express your value proposition to your target market during the marketing and selling of your product or service, the further along this spectrum you will be, achieving higher profit margins. But for now, let's start with a cost-based price estimation.

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First of all, decide how much profit you would like to make. This is net operating profit after all costs have been taken into account. There is no correct answer. Businesses selling fast moving consumer goods can operate on a very low margin while professional services businesses tend to operate on high margins. However, it is often difficult to manage cashflow and grow a business if operating profits are less than 10-20%. So we recommend you start your calculation there.

If you'd prefer to calculate a break even price, set the profit margin to zero.

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Now lets figure out your overheads. These are your fixed costs that you have whether you sell something or not.
These are the monthly costs associated with the premises you operate from, including rent, mortgage repayments (capital), business rates, maintenance, etc.
Estimate your monthly costs for electricity, gas, water, telephones, internet and television licenses.
Estimate your monthly costs for various professional services including banking, accountancy, coaching, legal costs, insurances, etc.
Estimate how much you pay in salaries for indirect employees. These are employees not directly involved in the delivery of the product or service, for example, book-keeper, admin assistant, manager, director. The calculation will take account of additional costs such as holidays, auto-enrolment pension, sickness, employers NI, etc.
Estimate how much you spend on vehicle costs or travel including, car leasing, fuel, insurance, maintenance, etc. associated with operating the business.
How much do you invest in marketing, on average, each month to win business?
Estimate how much you spend on other overheads not captured above.
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Next let's estimate how much it costs to produce and deliver your products or services.
Estimate how much it costs in materials to deliver one unit of your product or service. You may need to figure this out on a piece of paper or in a spreadsheet and come back to insert the total value here.

How many hours are spent directly in delivering one unit of your product or service?

Add up all the hours for all the people involved.

What is the average rate you pay for the labour to deliver one unit of your product or service?

If it's only you, what do you pay yourself or what should you pay yourself at market rate for what you do?

If you have multiple pay rates, figure out an average. For example, if you pay a labourer £14/hour and a supervisor £17.50/hour and a job requires 50 labourer hours and 20 supervisor hours then the average cost per hour is 14x50 + 17.50x20 divided by 70 total hours equals £15 per hour.
This is the total wage cost for the labour to deliver one unit of your product or service
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On the next page you will see the result of the information you've added here. It will tell you the unit cost of your product or service required to deliver the profit margin you have specified.
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This is the estimated price you must charge for your product or service in order to achieve the profit margin you require.

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