Set up your selling price: Know your variable and fixed expenses

At the moment of starting up a business one of the most confusing steps is trying to decide the price for your product or services. Just having to buy supplies or wages of employees already leaves a debt for your business that should be covered by the sales money. Do you know how to calculate the price of what you offer?

• Fixed Expenses

As their name implies, they are expenses that must be paid regardless of how much you sell. These expenses are often related to your place such as internet, rent, and other bills that may arrive month by month even if you are starting up in your own house. Make a list of bills that must be paid on your business month per month, the bare minimum of sales must cover these expenses.

• Variable Expenses

In almost all sources you will find that in these category falls all the expenses

En casi todas las fuentes encontrarás que en esta categoría los gastos that involve purchase of stock and materials required to get ready your merchandise. They will be changing every now and then because the quantity purchased changes based on how much you sell. These expenses could even be bigger or smaller depending on the supplier and volume of purchase you have, whether wholesale or retail packages.

• Take inspo from your industry and city

Price matching could be useful as inspo or reference of how the prices are set up in your city. Consider the size of the business you are benchmarking, the finances of a bigger business who produces bigger batches have the capacity of setting lower prices, while a small business may buy less material and therefore, may have bigger producing prices.

Identifying your expenses is the first step of creating smarter prices on your product or service. We refer to them as smarter prices because they will help you have a more stable business where every sale you do helps you cover expenses and also have some revenue to invest on your business.

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