Product pricing template
The Product pricing template can help you calculate how much you should sell your offerings for, in order to make the margin you want.
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<p>Your Product Pricing Template can help you calculate how much you should sell your offerings for, in order to make the margin you want. You’ll be able to add in all your costs, plus whatever sales taxes you need to pay in your area.</p>
<h3>Step One – Enter your cost of raw materials</h3>
<p>Begin by entering the unit cost of your raw materials.</p>
<p>For example, if you own a picture framing business, your raw materials will predominantly be the parts of the frame. You’ll want to make use of this calculator for each product type or size that you sell, as each will come to different suggested selling prices.</p>
<p>We’ll estimate the per-unit raw materials cost of a single small frame to be $30.</p>
<h3>Step Two – Enter your transportation costs</h3>
<p>Now enter any transport costs associated with creating your product.</p>
<p>Using our above example, your raw materials may have to be delivered from out of town, meaning there will be some transport costs involved. We’ll enter $5 for transportation costs per unit.</p>
<h3>Step Three – Enter your packaging costs</h3>
<p>If your customers visit your store to buy your goods, you may not have any packaging costs and can leave this box blank.</p>
<p>In our example, let’s assume your customers primarily get their frames delivered to their homes. As a result, we’ll enter $8 in packaging costs for a single small frame.</p>
<h3>Step Four – Enter your labor costs</h3>
<p>Your labor costs will vary between different types of products, so it’s important to calculate them only for the product you’re plugging into the template.</p>
<p>With the picture framing example, let’s say you have an employee who shapes each frame into a final product, taking one hour to complete a single small frame. This employee is paid $20 an hour, so you will enter a labor cost of $20.</p>
<h3>Step Five – Enter any other costs</h3>
<p>Add in the total of any other costs that go toward creating your product and preparing it for sale. These could include:</p>
<ul>
<li>Storage costs – For the average time your raw materials are stored somewhere.</li>
<li>Rent – You might have to look at adding a small portion of this cost to every product you sell.</li>
<li>Marketing – Averaging out the cost of your advertising for each item sold.</li>
</ul>
<p>We’ll add other costs of $5 to your picture framing product price. Notice that the ‘Total cost’ figure has added up all your product costs.</p>
<h3>Step Six – Add your required margin</h3>
<p>The next important step is to enter the required margin you want to make on this particular product to ensure it’s worth your while. You might have a percentage of your total costs in mind that you want to add as a margin.</p>
<p>With the above example, your total costs come to $68. If we assume you want a margin of roughly one-third of your costs, your required margin would be $23.</p>
<h3>Step Seven – Input your sales tax rate</h3>
<p>This figure could be anything from five to 15 percent, depending on which province you live in.</p>
<p>Let’s use an average tax of 10 percent in our example.</p>
<h3>Step Eight – Evaluate your results</h3>
<p>Once you’ve plugged in all figures, you can analyse the results at the bottom. There are two results to check:</p>
<ul>
<li>Your sell price excluding tax.</li>
<li>Your sell price including tax.</li>
</ul>
<p>In our example, we calculated a sell price excluding tax of $91 and a sell price including tax of $100.10.</p>
<p>If this price is what your customers would be prepared to pay for a single small frame (and is in line with some of your competitors’ prices), you may have found your product price. If not, review the template and adjust some of the figures until you get a feasible price.</p>Article Preview
How to use your Product Pricing Template
Your Product Pricing Template can help you calculate how much you should sell your offerings for, in order to make the margin you want. You’ll be able to add in all your costs, plus whatever sales taxes you need to pay in your area of Canada.
Step One – Enter your cost of raw materials
Begin by entering the unit cost of your raw materials.
For example, if you own a picture framing business, your raw materials will predominantly be the parts of the frame. You’ll want to make use of this calculator for each product type or size that you sell, as each will come to different suggested selling prices.
We’ll estimate the per-unit raw materials cost of a single small frame to be $30.
Step Two – Enter your transportation costs
Now enter any transport costs associated with creating your product.
Using our above example, your raw materials may have to be delivered from out of town, meaning there will be some transport costs involved. We’ll enter $5 for transportation costs per unit.
Step Three – Enter your packaging costs
If your customers visit your store to buy your goods, you may not have any packaging costs and can leave this box blank.
In our example, let’s assume your customers primarily get their frames delivered to their homes. As a result, we’ll enter $8 in packaging costs for a single small frame.
Step Four – Enter your labor costs
Your labor costs will vary between different types of products, so it’s important to calculate them only for the product you’re plugging into the template.
With the picture framing example, let’s say you have an employee who shapes each frame into a final product, taking one hour to complete a single small frame. This employee is paid $20 an hour, so you will enter a labor cost of $20.
Step Five – Enter any other costs
Add in the total of any other costs that go toward creating your product and preparing it for sale. These could include:
- Storage costs – For the average time your raw materials are stored somewhere.
- Rent – You might have to look at adding a small portion of this cost to every product you sell.
- Marketing – Averaging out the cost of your advertising for each item sold.
We’ll add other costs of $5 to your picture framing product price. Notice that the ‘Total cost’ figure has added up all your product costs.
Step Six – Add your required margin
The next important step is to enter the required margin you want to make on this particular product to ensure it’s worth your while. You might have a percentage of your total costs in mind that you want to add as a margin.
With the above example, your total costs come to $68. If we assume you want a margin of roughly one-third of your costs, your required margin would be $23.
Step Seven – Input your sales tax rate
This figure could be anything from five to 15 percent, depending on which province you live in.
Let’s use an average tax of 10 percent in our example.
Step Eight – Evaluate your results
Once you’ve plugged in all figures, you can analyse the results at the bottom. There are two results to check:
- Your sell price excluding tax.
- Your sell price including tax.
In our example, we calculated a sell price excluding tax of $91 and a sell price including tax of $100.10.
If this price is what your customers would be prepared to pay for a single small frame (and is in line with some of your competitors’ prices), you may have found your product price. If not, review the template and adjust some of the figures until you get a feasible price.
