PRICING FOR A PROFIT NOTES & EXERCISE WORKSHEET
“Businesses exist to make a profit
and are entitled to do so”
Everyone’s Money Story is Different
• People will find the $$ to buy what is IMPORTANT to
them.
• Your Job = Understand and Let people pay you for
THEIR priorities.
• YOU do not get to determine what is important to your
customers --- that is their job.
PROFIT IS….
the money that has a purpose beyond the day to day operations
to grow the business
to put into savings
money to spend and to give
BUSINESSES CANNOT GROW WITHOUT PROFIT
How are you going to add an employee if you are not making profit?
Worksheet is Property of EllieO, LLC 2015, Applique Corner 2015 and Everything Applique Conference
SHOULD NOT BE COPIED, REPRODUCED OR PASSED OFF AS YOUR OWN WITHOUT WRITTEN PERMISSION FROM THE ABOVE
Materials + Labor + Overhead = Product Cost (Price)
MATERIALS
Direct Cost of the Product
Cost to embellish (thread, stabilizer, fabric etc)
(the average cost to embellish a product will have to be calculated by you --it can sometimes be $1.00 - $1.50 or with applique as much as $7.00)
Example
Tank Top - $12.00
Shipping = $1.00
Cost to Monogram Left Chest 3.5” = $1.50
Total Material Cost = $14.50
LABOR
Profit and Labor are NOT the same thing
Employee Cost to Complete Customer’s Product from start to
finish
Example
Front Desk Worker Taking Order (10 minutes at $10 hour) = $2.00
Monogramming Time = (15 minutes at $15 hour) = $3.75
Total Labor Cost = $5.75
OVERHEAD
Yes, it cost money to run a business
Utilities
Office Supplies
Machine Maintenance
Website Fees
AND LOTS MORE…..
Example
Take the average cost of your products you sell (divide)
Yearly Sales Goal = # of Products you need to sell to make goal
THEN
(# of Products) / (Total Yearly Overhead Cost) = Average Overhead Cost Per Product
Total Overhead Cost = $2.75
TOTAL DIRECT COST TO THE BUSINESS FOR A MONOGRAMMED TANK TOP = $23.00
This means if I sell the tank top for $23.00 I will make NO PROFIT
Remember, Profit is NOT labor
Worksheet is Property of EllieO, LLC 2015, Applique Corner 2015 and Everything Applique Conference
SHOULD NOT BE COPIED, REPRODUCED OR PASSED OFF AS YOUR OWN WITHOUT WRITTEN PERMISSION FROM THE ABOVE
Not Everyone or Every Product has the same Profit Margin
What you want to ADD as profit to your direct cost is up to YOU
MOST COMMON: Retail Pricing
100% Keystone Mark-Up
If the Tank Top Direct Cost to the business is $23.00
Retail Price = $46.00 ($23 x 2 = $46.00)
1. What is your Yearly Sales Goal?
2. How many hours per week do you work on your business? OR How many hours per week is your business open?
How many weeks per year do you work on your business?
(Weeks Per Year) x (Hours Per Week) = (Total Hours Per Year)
3. How much do you need to sell or bring in per hour to meet your yearly sales goal?
(Yearly Sales Goal)/(Total Hours Per Year) = ($ Per Hour Needed to Meet Sales Goal)
1. How much is your labor per hour? How much do you want to pay yourself?
Remember! What you pay yourself is NOT profit --- this is a direct cost in operating a business!
Owner/Operator $___________ per hour
Employee #1______________ per hour
Employee #2______________ per hour
Worksheet is Property of EllieO, LLC 2015, Applique Corner 2015 and Everything Applique Conference
SHOULD NOT BE COPIED, REPRODUCED OR PASSED OFF AS YOUR OWN WITHOUT WRITTEN PERMISSION FROM THE ABOVE
1. Product Pricing
Use the charts to calculate the cost of a product (a single product). For materials, list all of the materials,
including packaging. For labor, include labor by you, an employee or independent contractor
MATERIALS
QTY
COST
TOTAL
MATERIALS TOTAL
LABOR
TIME
COST
TOTAL
LABOR TOTAL
OVERHEAD
MONTHLY COST
YEARLY COST
TOTAL
OVERHEAD TOTAL
Worksheet is Property of EllieO, LLC 2015, Applique Corner 2015 and Everything Applique Conference
SHOULD NOT BE COPIED, REPRODUCED OR PASSED OFF AS YOUR OWN WITHOUT WRITTEN PERMISSION FROM THE ABOVE