A profitable pricing structure should incorporate all operating expenses into the "selling price" of goods or services, while reflecting a competitive edge to insure the stability and growth of your business. The basic pricing rule is "cost plus" (cost of expenditures, inventory and supplies plus an added percentage to cover increases, shrinkage and future expansion). Pricing is usually divided into three main categories: Retail, Service and a Combination Retail/Service. Although these three types of businesses use a slightly different "cost plus" monetary scale, they must each reflect pricing that will result in a net profit.
- Hard Core Retail (non-perishable and non-dated merchandise) incorporates all costs of operation from rent to utilities, insurance, taxes, salaries,supplies, shrinkage and other monetary expenses.
- Soft Core Retail (perishable and dated goods), which has a higher volume of sales, uses a slightly lower "cost plus" scale and then adds an extra percentage for loss due to spoilage.
- Large diversified stores use varying combinations of 1 & 2 by tailoring the pricing structure to each individual department.
- These businesses use the basic daily operational cost rule plus time and supplies.
- Combination Retail & Service Businesses
- This type of multi-oriented business usually has two pricing structures. The first is based individually on either retail or service, as described above. The second incorporates a reduced rate for purchase and service packages.
To help you "Price For Profit" in your specific business, SCORE, A Resource Partner of the U.S. Small Business Administration, offers free, confidential one-on-one business counseling with experienced executives plus a day long monthly Workshop for a nominal fee. For the location, phone number and counseling hours of the office nearest you, call our main Dallas SCORE Office at (214) 987-9491.