Thank you for this video. It really helped. You have a new sub. I recently started a business. A cleaning business by myself and I was really struggling with this concept.
@@lancesterling8447 Congrats on the new business! Remember, you wear two hats. One as the "employee" and one as the business owner. So make sure your pricing covers the hourly wage but more importantly the business costs and some for the owner! :-) _ Tammy
@@BadassBusinessOwners I understand the concept somewhat. So do I add my labor and costs together then mark it up or use margin? That is probably the most confusing part.
@@lancesterling8447 Hey there! If you have a service-based business, then you need to have a basic wage to use for the hourly time spent providing the service. So for example, if you would pay someone $15 an hour to do it, then 2 hours of labor costs would be $30. If you would pay someone $25 an hour it would be $50 for the two hours. Then add that to all the other costs to provide the service. So let's say that is $25. If we use our first example, then you have $30 for the labor and $25 for the costs so a total COGS of $55. For the question about markup vs margin, you need to know how much profit you want to make on the job. Some will want a set dollar amount, like say $25, and some will want a percentage like say 25%. But you also need to know how much you need to set aside for the expenses. So if your expenses run 20% then you know that whatever price you set, 20% will be set aside. You can use markup or margin but honestly, most folks have an idea of what they want to charge, the key is to plug in the numbers to see if they work. So if someone wants to charge $100 for this fictional sale and they know sales - cogs - expenses = profit - they can plug in $100 - $55 - $20 = $25. ($100 x 20% = $20 for expenses). In this example, they will hit their profit goal and still cover all the costs and expenses. There are a few ways to get there but at the end of the day, the price needs to cover all 3 buckets of where the money will flow. Hope that makes sense. LOL
@@BadassBusinessOwners That makes sense. So let's say I get a contract for 8 hrs, 5 days a wk. at 12 a hr. Thats what I would pay someone in my area. So that's 480 a wk. x 4 which is 1920 (labor) that's the cost. I get that part. My expenses would be 295. I get those 2 parts. Where I get lost at is how do I determine a profit on this. Where to input it at. 1920 is my labor I'm selling to the client and expenses is 295 which is 2215 for a months work. Do I add a margin to the end number? I think I almost have the concept.
Great question. Only count business expenses. Your personal expenses will be paid out of any wages or owners draw you take. However, if the business “rents” from you personally then you can count that. Hope it makes sense.
@@BadassBusinessOwners Do you happen to have a video on how to estimate your expenses if you're starting a new business and need to determine your pricing? How do you make sure you price yourself right so that you have a profit margin and can cover all your expenses?
@@vazq_Fernanda - I'm going to share two but here is what you want to do. It's a great question!. You will take a generic P&L and look at the expenses and start to guestimate what you think yours will be. It will not be perfect but you are just looking to get a good idea. Here is a video on expenses and your P&L. ua-cam.com/video/pFDeAgb0gjo/v-deo.html Then using that information, plug it in. Here is a video that shows you even more on that and pricing. ua-cam.com/video/--cGU3vEXO8/v-deo.html I'm going to make a note. This would be a great video to make! Like I said, a great question
Hey there. I might be misunderstanding the question. You should be capturing all business expenses. If you mean would I capture owners' pay for "employee" time? I like that idea personally. How you do it will depend on your business entity. But say you are a solo DBA or solo LLC where it all passes through to you anyway. You could have any money you would typically "pay" an employee so you can see what the true cost of goods would be and then any owner pay as the owner draw. Just remember, that any money you take out is technically all owner's draw. But you are just trying to get your true COGS so you can price correctly. (S Corps and Corps) already take a fair wage. Hope this helps.
One major factor missing from this equation is what is the expected price from the market? What is the customer willing to pay based on the market. If it's lower than the price you come up with you're not going to get the business. Sometimes you have to find ways to lower your costs or make less profit to get the sale.
Great point. Business Owners have to keep in mind that if the price must go down, so must the costs in order to maintain the desired profits. You can't keep a high out go if your incoming can't keep up. - Tammy
@@BadassBusinessOwners thank you for the video, and great comment Nathan. I feel we're in a unique environment where customer is less willing to pay, however I cannot find any ways to reduce costs due to inflation. At this point, the absolute lowest we should go in terms of profits is breakeven to keep the doors open? (worst case)
@@pshores Breakeven would be as long as you are still able to pay yourself as the "employee" (labor costs). You never want to sacrifice covering the minimum for your employee time (at a fair wage). The owner you, is sacrificing the profits. Hope that makes sense. But the worse the market, the more you need to target the right people who are still willing to pay the correct pricing. Good point..
Hello, Thanks for the great video! Trying to figure out where to start with pricing for a new business. It would be something like a home masseuse, where I go to their house for less than an hour (10-15 mins). They might have the service 1x a week or 7x a week. So gas and vehicle related expenses would be the main costs and emplyee at $20hour. I'm thinking a recurring automatic charge depending on how often the customer wants the sevice, to make collecting payment easy. I just was wondering where you would start the pricing for each visit. It would be very local, btw. My own hood. If you can, I know its not exaclty on topic. I'm just brand new to business. Thanks gor your sevicies!
First off, great news on the new business. The best place to start is what your competition is doing. Plus, you might have one price for 1 session, then the more they sign up for it starts to discount. So, using random numbers, it might be $45 for one visit, $120 for 3 visits, or $200 for six. You just make sure the big package is profitable. But it gives an incentive for them to buy bigger packages. Hope that makes sense. Good luck with the new business! - Tammy
It is just an example. So, in this case, I'm assuming this business owner has $50 in materials, parts, or ingredients. Basically, whatever is used in the product or service. Hope this helps. - Tammy
How do i price for a dog groomer? Ive researched several different ways and get a very vague answer. I just purchased a building that i was lucky enough to have paid for it in cash. This is my first business venture on my own and i obviously dont have a PNL statement. So how do i know and how do i make sure im getting paid properly and the business stays out of the red? When it comes to products im using (shampoo, conditioner,etc) do i break that down into how many uses i get from say a 5 gallon bottle? Thank you for the amazing videos. They are definitely informative, but they do lead you to other questions, lol.
Hey Kim! Great question. Congrats on the new adventure! Lot to tackle here. (you are right, more info leads to more questions...lol) On your supplies, yes, just figure out approximately how many uses you would get out of it to figure out COGs by sale. You don't have to be perfect, just a good solid average should work. As for pricing. I'd do some homework on what all three types charge in your area. Brick and mortar, vs mobile groomer, vs in their home. This will give you a basic idea of the market. Then you can plug in your expected costs, and expenses to see if that price will work. Owning your own building is like having a cash cow in a brick-and-mortar as you save on the monthly payment others must pay. Hope this helps! Good luck! You got this! - Tammy
@@BadassBusinessOwners thank you so very much!! I appreciate your help and your quick response!! I never thought about checking all the business types, just the brick and mortar. Thank you, thank you, thank you!!! You are AWESOME!!!!
You debt will usually be part of your expenses but any investor money typically will come out of your company profits. So when you are looking at Sales-COGS-Expenese=Profits, you need to make sure that you are adding those. Hopefully your Profit & Loss for example has the debt. So if you are running 20% expenses, the debt is part of that. So when you price, you are including it when you project 20% for expenses when pricing. If you are shooting for a 25% profit on your products or services, you just want to keep in mind that 5% (or whatever you need at the end of the month) of that 25% will be retained earnings go to the investors. You don't put it all into one item or service, you look at the monthly need and spread it out based on how many units or services you provide. The key is to make sure it part of each portion of where the money goes. HOpe this makes sense. - Tammy
I provide a service that requires me to employ other people, assist client design the method they want to use because processes are unique based on the client needs. I also get services from other providers providing services to my company to do the client's work. What is my cost base?
Sounds like you will have a line under the cost of goods for independent contractors. Those outside of your company that creates stuff that you have to pay for and pass along to the client as part of the costs of creating what you are delivering.
How would a new business owner calculate expenses since when starting you have more of a lost than profit. So in that situation how should you go about figuring a price for your deliver service ?
Are you referring to having expenses to pre-purchase materials or equipment? Early on your profit and loss might operate at a loss while you build your profits to pay them down. When pricing, you want to focus on what they typically will fun. COGS will remain what they actually are (not what you already purchased). For expenses you will want to figure out what a typical month will run. It will be your profit line that will be lower until you can create enough sales to spread those expenses across them all. The more you sell the lower the percent of sales they take. For example, if you have $100 in expenses. And 3 sales at $100 each, your expenses run 33% or a third of your sales. But once you get a 4th sale, it is now spread across 4 so it drops from 33% (1/3) down to 25% (1/4). So focus on the market and what seems to be in line and then adjust as you go as that percentage will fall more in line. Hope this makes sense. - Tammy
What is the Hardest Part for You When Setting Your Prices? - Tammy
Thank you for this video. It really helped. You have a new sub. I recently started a business. A cleaning business by myself and I was really struggling with this concept.
@@lancesterling8447 Congrats on the new business! Remember, you wear two hats. One as the "employee" and one as the business owner. So make sure your pricing covers the hourly wage but more importantly the business costs and some for the owner! :-) _ Tammy
@@BadassBusinessOwners I understand the concept somewhat. So do I add my labor and costs together then mark it up or use margin? That is probably the most confusing part.
@@lancesterling8447 Hey there! If you have a service-based business, then you need to have a basic wage to use for the hourly time spent providing the service. So for example, if you would pay someone $15 an hour to do it, then 2 hours of labor costs would be $30. If you would pay someone $25 an hour it would be $50 for the two hours. Then add that to all the other costs to provide the service. So let's say that is $25. If we use our first example, then you have $30 for the labor and $25 for the costs so a total COGS of $55. For the question about markup vs margin, you need to know how much profit you want to make on the job. Some will want a set dollar amount, like say $25, and some will want a percentage like say 25%. But you also need to know how much you need to set aside for the expenses. So if your expenses run 20% then you know that whatever price you set, 20% will be set aside. You can use markup or margin but honestly, most folks have an idea of what they want to charge, the key is to plug in the numbers to see if they work. So if someone wants to charge $100 for this fictional sale and they know sales - cogs - expenses = profit - they can plug in $100 - $55 - $20 = $25. ($100 x 20% = $20 for expenses). In this example, they will hit their profit goal and still cover all the costs and expenses. There are a few ways to get there but at the end of the day, the price needs to cover all 3 buckets of where the money will flow. Hope that makes sense. LOL
@@BadassBusinessOwners That makes sense. So let's say I get a contract for 8 hrs, 5 days a wk. at 12 a hr. Thats what I would pay someone in my area. So that's 480 a wk. x 4 which is 1920 (labor) that's the cost. I get that part. My expenses would be 295. I get those 2 parts. Where I get lost at is how do I determine a profit on this. Where to input it at. 1920 is my labor I'm selling to the client and expenses is 295 which is 2215 for a months work. Do I add a margin to the end number? I think I almost have the concept.
Excellent video, Thank you!
Glad you liked it! - Tammy
loved the way this video was presented thank you!
Ah, thanks!
When calculating expenses do I need to incorporate both business and personal? For example home rent and office rent.
Great question. Only count business expenses. Your personal expenses will be paid out of any wages or owners draw you take. However, if the business “rents” from you personally then you can count that. Hope it makes sense.
Superb,,, you hv just opened my eyes ..
thank you for this video...
Glad it helped!
This was so helpful! Thank you!
Glad it helped! - tammy
@@BadassBusinessOwners Do you happen to have a video on how to estimate your expenses if you're starting a new business and need to determine your pricing? How do you make sure you price yourself right so that you have a profit margin and can cover all your expenses?
@@vazq_Fernanda - I'm going to share two but here is what you want to do. It's a great question!. You will take a generic P&L and look at the expenses and start to guestimate what you think yours will be. It will not be perfect but you are just looking to get a good idea. Here is a video on expenses and your P&L. ua-cam.com/video/pFDeAgb0gjo/v-deo.html Then using that information, plug it in. Here is a video that shows you even more on that and pricing. ua-cam.com/video/--cGU3vEXO8/v-deo.html I'm going to make a note. This would be a great video to make! Like I said, a great question
@@BadassBusinessOwners Wonderful! Thank you so much!
Thank you🎉
Really helpful thank-you
Glad it was helpful!
Thank you so much! So helpful
Really good information! Thank you!
Glad it was helpful! -Tammy
Excellent information, well presented. Thanks
Glad it was helpful!
Great information Tammy! :)
Glad it was helpful!
Great Info
Really good information! Does it make sense to make a journal entry for a working owner to account for top line expenses on your P&L?
Hey there. I might be misunderstanding the question. You should be capturing all business expenses. If you mean would I capture owners' pay for "employee" time? I like that idea personally. How you do it will depend on your business entity. But say you are a solo DBA or solo LLC where it all passes through to you anyway. You could have any money you would typically "pay" an employee so you can see what the true cost of goods would be and then any owner pay as the owner draw. Just remember, that any money you take out is technically all owner's draw. But you are just trying to get your true COGS so you can price correctly. (S Corps and Corps) already take a fair wage. Hope this helps.
One major factor missing from this equation is what is the expected price from the market? What is the customer willing to pay based on the market. If it's lower than the price you come up with you're not going to get the business. Sometimes you have to find ways to lower your costs or make less profit to get the sale.
Great point. Business Owners have to keep in mind that if the price must go down, so must the costs in order to maintain the desired profits. You can't keep a high out go if your incoming can't keep up. - Tammy
@@BadassBusinessOwners this video has really great information. Thank you. Is there also a video discussing this topic?
@@purplegirl8036 Glad it helped! Here is another one is you would like: ua-cam.com/video/--cGU3vEXO8/v-deo.html. This is also on pricing better...
@@BadassBusinessOwners thank you for the video, and great comment Nathan. I feel we're in a unique environment where customer is less willing to pay, however I cannot find any ways to reduce costs due to inflation. At this point, the absolute lowest we should go in terms of profits is breakeven to keep the doors open? (worst case)
@@pshores Breakeven would be as long as you are still able to pay yourself as the "employee" (labor costs). You never want to sacrifice covering the minimum for your employee time (at a fair wage). The owner you, is sacrificing the profits. Hope that makes sense. But the worse the market, the more you need to target the right people who are still willing to pay the correct pricing. Good point..
Hello, Thanks for the great video!
Trying to figure out where to start with pricing for a new business. It would be something like a home masseuse, where I go to their house for less than an hour (10-15 mins). They might have the service 1x a week or 7x a week. So gas and vehicle related expenses would be the main costs and emplyee at $20hour. I'm thinking a recurring automatic charge depending on how often the customer wants the sevice, to make collecting payment easy. I just was wondering where you would start the pricing for each visit. It would be very local, btw. My own hood.
If you can, I know its not exaclty on topic. I'm just brand new to business. Thanks gor your sevicies!
First off, great news on the new business. The best place to start is what your competition is doing. Plus, you might have one price for 1 session, then the more they sign up for it starts to discount. So, using random numbers, it might be $45 for one visit, $120 for 3 visits, or $200 for six. You just make sure the big package is profitable. But it gives an incentive for them to buy bigger packages. Hope that makes sense. Good luck with the new business! - Tammy
@@BadassBusinessOwners Thanks! And yes that made sense!
Theres no business savings For rainy days??
That's what you want some of your retained earnings from the profits to go towards. - Tammy
Great and simple examples! Although the handyman you use in this example needs to charge much more! lol
LOL. Yes they do! - PreCovid prices. LOL. Tammy
what is the 50 parts which you say in costs
It is just an example. So, in this case, I'm assuming this business owner has $50 in materials, parts, or ingredients. Basically, whatever is used in the product or service. Hope this helps. - Tammy
How do i price for a dog groomer? Ive researched several different ways and get a very vague answer. I just purchased a building that i was lucky enough to have paid for it in cash. This is my first business venture on my own and i obviously dont have a PNL statement. So how do i know and how do i make sure im getting paid properly and the business stays out of the red? When it comes to products im using (shampoo, conditioner,etc) do i break that down into how many uses i get from say a 5 gallon bottle? Thank you for the amazing videos. They are definitely informative, but they do lead you to other questions, lol.
Hey Kim! Great question. Congrats on the new adventure! Lot to tackle here. (you are right, more info leads to more questions...lol) On your supplies, yes, just figure out approximately how many uses you would get out of it to figure out COGs by sale. You don't have to be perfect, just a good solid average should work. As for pricing. I'd do some homework on what all three types charge in your area. Brick and mortar, vs mobile groomer, vs in their home. This will give you a basic idea of the market. Then you can plug in your expected costs, and expenses to see if that price will work. Owning your own building is like having a cash cow in a brick-and-mortar as you save on the monthly payment others must pay. Hope this helps! Good luck! You got this! - Tammy
@@BadassBusinessOwners thank you so very much!! I appreciate your help and your quick response!! I never thought about checking all the business types, just the brick and mortar. Thank you, thank you, thank you!!! You are AWESOME!!!!
Can you please tell me how to set price when we have debt or investors money in our business?
You debt will usually be part of your expenses but any investor money typically will come out of your company profits. So when you are looking at Sales-COGS-Expenese=Profits, you need to make sure that you are adding those. Hopefully your Profit & Loss for example has the debt. So if you are running 20% expenses, the debt is part of that. So when you price, you are including it when you project 20% for expenses when pricing. If you are shooting for a 25% profit on your products or services, you just want to keep in mind that 5% (or whatever you need at the end of the month) of that 25% will be retained earnings go to the investors. You don't put it all into one item or service, you look at the monthly need and spread it out based on how many units or services you provide. The key is to make sure it part of each portion of where the money goes. HOpe this makes sense. - Tammy
@@BadassBusinessOwners thank you very much surely this was helpful!
I provide a service that requires me to employ other people, assist client design the method they want to use because processes are unique based on the client needs. I also get services from other providers providing services to my company to do the client's work. What is my cost base?
Sounds like you will have a line under the cost of goods for independent contractors. Those outside of your company that creates stuff that you have to pay for and pass along to the client as part of the costs of creating what you are delivering.
How would a new business owner calculate expenses since when starting you have more of a lost than profit. So in that situation how should you go about figuring a price for your deliver service ?
Are you referring to having expenses to pre-purchase materials or equipment? Early on your profit and loss might operate at a loss while you build your profits to pay them down. When pricing, you want to focus on what they typically will fun. COGS will remain what they actually are (not what you already purchased). For expenses you will want to figure out what a typical month will run. It will be your profit line that will be lower until you can create enough sales to spread those expenses across them all. The more you sell the lower the percent of sales they take. For example, if you have $100 in expenses. And 3 sales at $100 each, your expenses run 33% or a third of your sales. But once you get a 4th sale, it is now spread across 4 so it drops from 33% (1/3) down to 25% (1/4). So focus on the market and what seems to be in line and then adjust as you go as that percentage will fall more in line. Hope this makes sense. - Tammy