3 Methods Selling Price Calculation Free Excel Template.
Calculating sales prices can be relatively simple, we see what prices the market has and depending on the characteristics and value of our products or services we can lower or raise it.
Depending on what phase of the business the company is in, prices may be lower or higher.
But setting prices that can assimilate demand is a matter of marketing or commercial.
The challenge facing the company is to monetize those prices that the market demands.
To monetize the prices I mean obtaining a Total Gross Margin = Unit gross margin x units sold, capable of exceeding general expenses or structural costs to obtain benefits.
The classic breakeven chart but with multiproduct and various services.
There are companies that obtain a margin so low that it is not enough to cover the general expenses and therefore they obtain losses.
Solution: Reduce general expenses or direct unit costs by product or service or increase sales prices. But be careful because you have to analyze the impact that a price increase can have on the demand for products or services. So the path with the least risk in the short term would be a reduction in general expenses.
In the Excel template with 3 methods for calculating sales prices that you can download for free you will find.
Method 1. Prices set by the market, this means that you will have to control very well the unit costs and the general expenses to avoid a negative profitability. This is usually the current situation, the market rules so you have to adjust to your needs.
Method 2. Calculation of sales prices on a percentage of the cost.
For example, if we have a product with a unit cost of 1 Euro and we apply a percentage on cost of 50%, the calculated sale price would be 1.5 Euros, however, the margin or profit of this sale price with respect to its cost would be only 33.3% and not 50%
Method 3. In this method we do apply the percentage of margin that we want to obtain. The formula used is completely different from the one used to add a percentage to the cost. That is, if we apply a margin or profit of 50%, this will be the calculated margin, there is no mystery regarding the application of this method.
In all the methods that we can work in the Excel template, the unit margin is calculated, multiplying this margin by the number of units expected to sell, we will obtain the total margin, then we can discount the general expenses or structural costs for obtain the expected total return.
In this way, all simulations can be performed and all possible scenarios can be generated to minimize risks and avoid obtaining losses.
But be careful, one thing is the simulation of a stage and another is reality. For this reason, it is very important to have a good budgetary control to avoid deviating from the established path and in case of deviating, be able to rectify and regain control of the profitability that we want to obtain.
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