Free Marketing Management Books

Free Book: How to Set Prices in a Service Business

How to Set Prices in a Service Business

A Step by Step Guide to Pricing Your Services (Pricing Strategies)

How to Set Prices in a Service BusinessThis guide will walk you step by step through all the essential phases of setting optimal prices in a service providing business. You will learn exactly how to set prices in a way that will allow you to make money and still be competitive

Here's what’s in the book:
* Common problems in setting prices and how to overcome them
* how to determine your costs
* Cost calculation examples
* How to set optimal prices

* How to raise prices without losing customers
* How to calculate hourly and project-based pricing
* all these and much more

Table of Contents

1. Introduction
2. Setting Prices Problems
3. Cost Determination
4. Cost Calculation Example
5. How to Set Optimal Prices
6. How to Raise Prices Without Losing Customers
7, Calculating Hourly and Project-Based Pricing

Click Here! to Download the Free PDF eBook


Sample Content

This guide discusses costing and setting prices of services to assure that each job earns a reasonable profit. The figures used in the tables and examples do not reflect what your service costs, set prices, and profits actually would or should be. The figures are used to demonstrate costing and set prices and are rounded off for further simplicity. Because of the importance and sometimes complexity of costing and pricing, it is good business practice to consult your trade association and particularly your accountant to learn what are the best current practices, cost ratios, and profit margins in your service business.

Setting Prices Problems
Many businesses are not making a profit today because they do not know the basic concepts of costing and set prices. The situation is most serious in the service business because each service performed has a different cost. Frequently, the service business must bid for jobs by making a price quotation in competition with similar businesses. Can you calculate your costs for your service and quote a price that is competitive and returns a profit?
Without realizing what they are doing, some business owners set their selling price below their total cost. This may result in more business for the company, but a loss will be incurred on each sale. Occasionally, a business owner who lacks a knowledge of costing will try to compensate by setting prices very high. The end result is that the business is not price competitive and does not attract sufficient customers to survive. Frequently, a business earns a profit on some particular service and loses money on other services without knowing which services are earning a profit and which services are incurring a loss. The year-end income statement combines the profits and losses from the various services performed over the year. Therefore, it is impossible to determine the profitability of specific service jobs from a year-end income statement.
Use a simplified approach to cost accounting that reflects the needs of the business and reports the cost with a reasonable degree of accuracy. The total cost of producing any service is composed of three parts: 1) the material cost, 2) the labor cost, and 3) the overhead cost. Direct materials and direct labor + overhead = total cost of service.


Cost Determination
Direct Material Cost
The direct material cost is made up of the cost to you for parts and supplies that are used on specific jobs. Once the list of parts and supplies to be used is developed, a check with the supplier will give an up-to-date material cost. The shipping and other handling (storage etc.) costs for the parts should be included in the material cost.
Direct Labor Cost
The direct labor costs include those labor costs identified with a specific service job. The labor cost involved in providing a service is determined by multiplying the number of direct labor hours required by the cost per direct labor hour. It is very important to determine accurately the amount of direct labor hours involved to complete the service; therefore, you must use a time clock, worksheet, or a daily time card for each employee to determine the exact amount of labor time spent on each service job.
The hourly cost of direct labor can be figured (priced) two ways. One it can be the hourly wage only, with fringe benefits, Social Security, Workers' Compensation, etc., (all labor-related costs) allocated to overhead. Or two, the hourly direct labor cost can include the hourly wage plus the employer's contribution to Social Security, unemployment compensation, disability, holidays and vacations, hospitalization and other fringe benefits (payroll costs).

By this second method, the added payroll costs for vacations, holidays and benefits are expressed as percentages of direct hourly wages. For instance, if two weeks of vacation and ten holidays are given annually, this amounts to four weeks per year or 7.7% (i.e., four weeks off divided by fifty-two weeks 4 : 52 = 7.7%) of total labor cost was for time off. Thus, to determine the total direct labor cost per hour by this method, you must add the prorated cost of the payroll taxes, worker's compensation, holidays and vacation pay, hospitalization, etc., to the hourly wage paid. As a rule of thumb, the sum of the various payroll-benefit costs have generally been in the range of 20% to 30% of the hourly wages paid. It is more complicated to figure but more precise to use the higher labor cost (including labor related labor costs).

Other books in this category that may interest you:


Sidebar: you are invited to visit our car insurance information section featuring a list of articles that may save you hundreds of dollars on your motor vehicles quotes. In full coverage auto insurance you'll discover helpful tips to getting cheap quotes. For information on how to get cheaper quotes on shorter terms see one month car insurance and also short term car insurance. For first time drivers information see cheap car insurance for new drivers. How about obtaining cheaper premium rates for mature women? no problem, look here, best insurance for new drivers over 25 year olds.

If you are interested in a half year duration see 6 month car insurance for helpful tips on the topic. How about getting more favorable premiums costs for younger drivers? see car insurance for 17 year olds and motor car insurance for under 21 and vehicle insurance for male and female under 25 years old. Here is another list of drivers insurance useful articles, As for helpful tips regarding no deposit premium payments see car insurance with no deposit and for a list of low cost brokers, agents and companies see car insurance with no deposit companies. Read the following informative article if you are looking for better rates for the young drivers in your family, cheaper vehicle insurance for young drivers. Now, for discovering new ways to get lower quotes go to general car insurance Read this article if your after high risk car insurance information.

How about getting a better deal on first time driver? just click the link. It may come a time that you'll be interested in canceling your policy, use this article for the instruction of how to do it. Our drivers insurance hub page features a list of guides that can surely help you get dirt cheap car insurance for teens drivers rates. For those of you who seek cheap quotes for a shorter term policy, read this article. and here are tips and advice for special interest groups such as young drivers and temporary insurance.

If you have first drivers in your family look here for useful advice regarding cheap drivers first car insurance on getting very very cheap car insurance quotes, other types of policies can include the following: no deposit car insurance, pay monthly, insuring classic cars for young drivers, getting better deal on cheap liability car insurance cost, locating good rates for new drivers. how about if you are interested in pay as you go auto insurance? yep there is a guide for you. And here is a list of car insurance companies cheapest. And the list concludes with a way to calculate car insurance estimate without personal information.

Disclaimer: While every effort is made to ensure that the content of this website is accurate, the website is provided “as is” and makes no representations or warranties in relation to the accuracy or completeness of the information found on it. While the content of this site is provided in good faith, we do not warrant that the information will be kept up to date, be true and not misleading, or that this site will always (or ever) be available for use. Nothing on this website should be taken to constitute professional advice or a formal recommendation and we exclude all representations and warranties relating to the content and use of this site.

Copyright © by Bizmove. All rights reserved.

Copyright © by Bizmove. All rights reserved.