The Fundamentals of Price and Cost Analyses


The Fundamentals of Price and Cost Analyses


By: Yvetta Busha, Intrinsic dm2, President/Owner

To learn more about Intrinsic dm2, click on the logoWith the end of the year approaching rapidly, many business owners are trying to squeeze in some last minute sales to improve there bottom line. I found myself thinking of the many different ways I could help my customers achieve this and decided to focus the next few blogs on doing just that. From simple pricing tips to implementing purchasing strategies that will allow for greater tax deductions, we will show you a few ways we can help you and your bottom line.

It doesn’t take a college degree to understand that the one thing all businesses need to stay in competition is Revenue. So what can be done to increase your sales? It starts with your pricing over anything else. The pricing of your product or service is a key element in determining the profitability of your business. The issue; it is not always easy to get the pricing right. If your prices are too high, you will most likely decrease demand for your products, cause customers to go to competitors, and in essence price yourself completely out of the market. On the other hand, if your prices are too low you run the risk of not producing the sales volume you need to cover your expenses.

So how does the right pricing increase revenue? Place yourself in your customers shoes for a minute, pricing is a key determinant in the decision making process customers use to purchase a product or service. It is essential to understand how much your target market will be willing to spend on your products or services. With the right prices, you will ensure customer satisfaction, return business, and enough revenue to cover the expenses you incur.

Pricing is a continuous process that needs to take into consideration the life-cycle of your product or service, as well as the price sensitivity of your customers. With a Price sensitive market, even the slightest change in price can have an extreme impact on your business. Price sensitive markets usually contain a very high level of competition with similar products. On the other hand a less price sensitive market includes a more tailored or exclusive product offering and experience less competition. No matter what the price sensitivity of your market is without the right pricing strategy other value added activities, such as marketing, suffer.

So how do we ensure that you have the right pricing strategy? We start by taking a look at your spending habits and revenue patterns. An in depth analysis is then done using various cost accounting methods to ensure that the pricing of your products best reflect the revenue you wish to obtain to cover your expenses while leaving a little more on the bottom line.

Yvetta Busha has 30 years of corporate and small business upper management experience in the financial and accounting sectors, along with a strong knowledge of both cash and accrual accounting systems, enabling her to oversee all aspects of financial forecasting, resource allocation, fund management, accounting and control. She is an expert in investment tax laws and payroll, remains current in Federal and State Tax Laws, and is a Quickbooks ProAdvisor. Contact Yvette at yvettebusha@intrinsicdm2.com.