Pricing Methods – Profit Target

One of the questions that new entrepreneurs ask are how to price their product. I think a more important question than pricing a product, is how much you get. Profit Target is when you organize your pricing to approve what you want.

Business costs are eter fixed or variable in nature. Knowing if your costs fall under a fixed or variable category is important because fixed fees affect your profit level either or not to sell.

Fixed Cost

Fixed costs are unchanged regardless of income. However, companies seeking to expand will see increases in real estate due to new investments made. Having fixed expenses is great when you expect high income.

Fixed costs can either be incurred costs or costs. Accepted costs are a direct consequence of owning an asset or signing a long-term contract. For example, sign up for a 2 year phone deal. With committed costs, it is usually a penalty for early termination.

Cost Profit

Cost-cutting is due to the decision of the company's owners. For example, the decision to subscribe to the network cost analysis. The subscription could usually be canceled without penalty. Companies that just start out will want more costly than fixed commitments.

Variable Costs

Variable expenses are those that differ in proportion to income. For example, credit card payments are a direct percentage of sales.

Profit-Based Profit

To calculate your target revenue, you need to know your sales price, total wage and variable costs. For example, Brain, Inc. to start a new online project. Brain Truechild Founder Brain Inc. plans to pay a $ 125 monthly fee. Brain has calculated its cost as follows:

Variable cost

  • Subcontractors: Each subcontractor will be paid $ 20 at the job change
  • Market Fees – Conversion Cost is estimated at $ 15 per customer.

Total variable cost = 20 + 15 = 35

Fixed costs

  • Web hosting charges – $ 15 per month
  • Other subscription charges – $ 30 per month
  • ] Other Fixed Cost – $ 100
  • Owners Pay $ 485 (You should always include payments in any business plan, whether you intend to take the money actually or not)

Total Fixed Expenditure = 15 + 30 + 100 + 485 = 630

Total Cost = Total Variable Cost + Total Fixed Cost = 35 + 630 = 665

Analysis – Margin Limit

Now, Brain knows permanent and variable costs, the next thing he must know is his contribution. Margin is the amount of each new subscriber to meet a fixed cost. Since Brain pays a fixed cost whether or not it is subscribed, it is important to know how much each new subscriber shares at a fixed cost.

Margin = Sales Price – Variable Costs

Margin Provision = 125-35 = 90

Breach Market

The breach point is the place where revenue is equal to spending. What you sell above your team is a profit.

Break even costs are calculated as follows:

Total fixed cost / unit margin = Elimination in units.

Brain item is 630/90 = 7 customers

7 customers translate 7 * 125 = $ 875 in revenue

All brain needs to break even have seven (7) subscribers. Anything beyond that is a profit.

Profit Target

What if Brain wants to pay off enough so he does not have to work? Brain's cost of living is $ 2,485 per month. He's already paying $ 485, so he needs $ 2,000 more. In addition, Brain will make an extra $ 3,000 monthly to reinvest in their business. This is a total profit of $ 5000 each month.

The formula for calculating target profit is as follows: (Fixed Cost + Markets) / Unit Submission Score = Number of Credits Brain Must Sell

= (630 + 5000) / 90 = About 63 Subscribers

] Brain requires 63 subscribers. Now, let's see how this figure is in the Profit and Loss Account:

Revenue Revenue (125 * 63)


Less: Parameters Costs (35 *

Total margin


Less: Fixed Cost

(because the proceeds are $ 40 more)


Brains marketing efforts must focus on building a system for subscription subscription revenue to 63 subscribers. The good thing is that when he gets a new subscriber he earns income from that subscriber, which means he does not have to work to build 63 subscribers every month. If this were Brains goal for the year, he only needs about 6-8 new subscribers each month. He should probably estimate about 10% more than his analysis because he could lose some subscribers along the way.

In short, when you break down a big goal in numbers, it's easier to see how you can do it. Business is simply a game of numbers. You just need to know how to work the numbers for your benefit.

The more you see the probability of the goal, the more likely you will see it to the end.


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