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| Starting a business from home (a small business from home) is a great oportunity. Before You start a working from home business read this report, how to start a business from home.
Starting and Managing a Business From Your HomeHow Much Shall I Charge?Four main factors will help you decide what to charge for your product or service: 1) your direct and indirect costs; 2) the profit you want to make; 3) your market research data on competitors' prices; and 4) the urgency of the market demand. There is rarely an exact "right" price but rather an acceptable price range within which you will want to fall. Avoid the common mistakes made by many new business owners--charging too much or too little. Use several approaches to arrive at a cost and "test" the price. If your ego is too involved, your price may be too high. On the other hand, if you have the attitude that "this is just a little something I do in my spare time" or "anybody could do this," then your price may be too low.Here is a formula for setting a fair price. Calculate your price using other approaches, too, before you make a final decision on price: Typical Pricing Formula1.Direct Material Costs--Figure the total cost of the raw materials you have to use to make up your item. Figure the cost of a group of items and then divide by the number of items to find the cost per item. If you can easily and immediately determine the material cost of a single item, fine. Some items are produced in batches, however, and it is easier to get an item cost by dividing the cost of a batch by the number of items eventually produced.2.Direct Labor Costs--Figure what you pay to employees to produce the item (whether or not you have employees now). You must assign a wage figure, even if you are the only one producing the item. Take the weekly salary you pay someone to produce the necessary number of items and divide it by the number of items. Add this figure to the Direct Material Costs total. Materials + Labor = $__________. 3. Overhead Expenses--These expenses include rent, gas and electricity, business telephone calls, packing and shipping supplies, delivery and freight charges, cleaning, insurance, office supplies, postage, payroll taxes, repairs, and maintenance. The accuracy of your costing depends on estimating logical amounts for all categories of expenses. If you are working at home, figure a portion of your total rent or mortgage payment (in proportion to your work space and storage areas), or assign a reasonable, competitive rent figure for the same amount and type of space. List all overhead expense items and total them. Divide the total overhead figure by the number of items per month (or time period you used above). The answer is your overhead per item. Overhead + Materials + Labor = Total Cost/Item 4. Profit--Include an amount added to the cost of each item so you won't end up just breaking even or making the employees' wages. Check your competition and see what they are charging. (Retailers generally double the wholesale price.) If your product is a little better than the competition, charge a little more. If your product is comparable, price it similarly. Remember, you will get the profit from each sale, in addition to the salary figure. Add the profit figure you have chosen to the total cost per item to get your total price per item. Profit + Total Cost/Item = Total Price/Item Remember, the main purpose in operating a business is to make a profit. Don't undersell your product or service just because "I'd be baking cakes anyway" or "I'm just starting out" or"I work out of my home." If you have a new, rare, handmade product or personalized service, the demand may be so high that customers are willing to pay a little more.
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