If you’re trying to decide whether to go ahead with a project, pricing is probably a major factor. When you’re making your calculations, don’t forget to consider (1) set up costs, (2) running costs and (3) pricing. Set up costs should include both equipment and the time involved in setting up the project – if, for example, you have to put 2 members of your team on a project for six months, then the cost is half a year’s wages for each (plus any bonuses). I created the tables below for our mini value plans (our value plans are used to assess whether an idea is worth doing or not).
Equipment, software e.t.c.
Time
| Team member |
Estimated hours |
Hourly rate
excl. bonuses |
Cost |
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|
|
|
Fixed costs (these don’t change from month to month)
Variable costs (these may change from month to month)
| (a) Price per hour/per day/per item that we’re going to charge |
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| (b) Direct costs per hour/per day/per item excluding overheads |
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| (c) Gross profit – per hour/per day/per item |
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| (d) Gross profit margin (c)/(a) x 100 |
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| (e) Overhead costs estimate for the whole first year of trading |
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| (f) Minimum sales for first year to make a profit = (e)/(d)% |
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| (g) Average value of a sale |
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