U.S.

Small Business Administration

Your Small Business Resource
Funded in part through a Cooperative Agreement
with the US Small Business Administration
2010 WESST Business Plan Worksheet Series | Page 1
WLSST
THE PLACE TO START &
GROW YOUR BUSI NESS
BUSINESS PLAN WORKSHEET
PRODUCT/SERVICE PRICING
STEP ONE: DETERMINING VARIABLE COSTS
How much will it cost me to produce my product or service? You can answer this question by determining
your variable costs:
Item Material Cost Labor Cost Commission
Shipping/
Packaging Other TOTAL COST

For example: I sell t-shirts. I purchase them wholesale for $7.00 each. Then I paint a design on them. I
bave gureo out tbat tbe amount ot palnt | use tor eacb t-sblrt costs 50 cents. |t takes me an bour to palnt
eacb t-sblrt ano | value my tlme at $10.00 per bour. | bang tbem on bangers tbat cost 25 cents eacb ano oe-
llver tbem to tbe store tbat sells tbem tor me. My oellvery cost ls 31 cents per mlle. |t ls 5 mlles to tbe store
and I usually deliver 10 t-shirts at a time, so my delivery cost per t-shirt is about 16 cents. I determine my vari-
able cost like this.
Item Material Cost Labor Cost Commission
Packaging/
Shipping Other TOTAL COST
T-Shirt $7.00+0.50 $5.00 $0.25+0.16 $12.91
U.S. Small Business Administration
Your Small Business Resource
Funded in part through a Cooperative Agreement
with the US Small Business Administration
2010 WESST Business Plan Worksheet Series | Page 2
STEP TWO: DETERMINING MARKUP
STEP THREE: DETERMINING FIXED COSTS
How much above this cost can I can price my product or service?
Item: ________________ Variable Cost Total (from p. 1): ______________
What prices are my competitors charging?
Can I offer advantages that would allow me to charge a higher price?
Atvantage: More products/services than competition Price: ____________
Atvantage: Finer quality Price: ____________
Atvantage: Im the only one that sells this product Price: ____________
Atvantage: Better terms (credit, etc) Price: ____________
Atvantage: ________________________________ Price: ____________
Atvantage: ________________________________ Price: ____________
Atvantage: ________________________________ Price: ____________
Atvantage: ________________________________ Price: ____________
Can | otter a lower prlce to attract more buslness but stlll make a prot?
| bave oecloeo to sell my t-sblrts to tbe publlc at $25.00 or almost oouble wbat tbey cost. |s tbls tbe rlgbt
price? Read on.
How much will it cost to run my business whether or not I have any sales? You can answer this question by
determining your \IHGSWXW: (Do this on a monthly basis.)
Rent Utilities Phone
Loan
Payment Insurance Salaries Advertising
Legal/
Accounting Other
TOTAL
COST

For example: Here are tbe eo costs tor our bypotbetlcal t-sblrt company:
Rent Utilities Phone
Loan
Payment Insurance Salaries Advertising
Legal/
Accounting Other
TOTAL
COST
$100 $25 $135 $50 $30 $50 $390
STEP FOUR: BREAK EVEN ANALYSIS
How much do I have to sell to QEOIETVSX or to break even? There are two ways to answer this ques-
tlon. One ls to gure out bow many oollars wortb ot your proouct or servlce to sell eacb montb. Tbe otber ls
to gure out bow many ltems ot your proouct you neeo to sell eacb montb.
U.S. Small Business Administration
Your Small Business Resource
Funded in part through a Cooperative Agreement
with the US Small Business Administration
2010 WESST Business Plan Worksheet Series | Page 3
BREAK EVEN ANALYSIS CONTINUED
A. Determining break-even in terms of dollars
Prlce ot Proouct/Servlce varlable Cost = Gross Prot
Gross Prot Prlce ot Proouct/Servlce = Gross Prot Margln
Total Fleo Costs Gross Prot Margln = Dollar Sales neeoeo eacb montb to break even.
For eample, the numbers for our t-shirt company would look like this:
$25.00 (prlce) - $12.81 (varlable cost) = $12.19 (gross prot)
$12.19 (gross prot) $25.00 (prlce) = 49 (gross prot margln).
Tbls means tbat tor every oollar ot sales | bave 49 cents ot prot tbat | can use to pay my eo
costs.
$390 (eo costs) 49 (gross prot margln) = $796.00.
Tbls means tbat | neeo to bave sales ot $796 every montb to break even.
B. Determining break-even in terms of number of items
Item Selling Price - Item Variable Cost = Item Contribution
Total Fleo Costs |tem Contrlbutlon = Number ot |tems neeoeo to break-even
For eample, the numbers for our t-shirt company would look like this:
$25.00 (prlce) 12.81 (varlable cost) = $12.19 (gross prot)
$390.00 (eo costs) $12.19 (gross prot) = 32 t-sblrts.
This means I have to sell 32 t-shirts every month to break even.