Pricing

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ice your product or service.
In summary, while you must be mindful of costs in setting your prices, don't limit your thinking only to cost-based pricing. Value-based pricing makes you think about your business from the customer's perspective. If the customer doesn't perceive value worth paying for at a price that offers you a fair profit, you need to re-think your game-plan!
The Starting Point: Calculating Break-Even
Before you can decide upon a fair price for your product, you need to know how much it's costing you! You'll need to know this no matter which pricing method you use.
Once you've identified costs, you can determine your break-even point. This is the point at which you neither make nor lose money in producing a product or delivering a service. For example, you would be at the break-even point if it cost you $100 to produce a product that you sell for $100.
A break-even analysis is the process you use to uncover those break-even numbers. To begin your break-even analysis, add up all fixed costs and determine what your variable costs are at different production volumes.
o Fixed costs, sometimes referred to as overhead, are expenses that don't vary according to production amounts–such as rent for office space (and storage space if you store inventory), office equipment (telephones, faxes, computers, etc.), insurance, utilities, etc.
o Variable costs are expenses that do vary with the amount of service provided or goods produced. They include costs such as hourly pay for a contractor on a specific project, raw materials, etc. Some variable costs don't depend specifically on the number of products produced but are still variable, such as advertising or promotion expenses.
You must know the cost of your overhead (fixed costs) as well as the incremental cost-per-unit (variable costs) before you can determine your break-even points.
Next, substitute your figures into the following break-even formulas.
Calculating Br...