Pricing and Costing

The start of any business transaction is setting the price and knowing what is your cost of providing the service or product. If you get either of these wrong then you will be in significant pain before you know it.

The broader financial budgets for an organisation are usually able to be reasonably well managed. It is however at the more detailed pricing, costing and cash flow level that the effectiveness of the financial game can break down.

GI’s experience is that good practice processes around pricing and costing requires having a good understanding of the key components of the process. GI can assist businesses with the full range of pricing and costing processes including:

  • The total direct cost of your products or services
  • The breakdown of direct cost into labour, materials, equipment, sub-supply and special components by unit of measure (hours, quantity) and by cost per unit
  • Volume impact on costs and price
  • Related variable overhead for the product or service
  • The fixed level of overhead your price needs to cover
  • Impact of price and cost differentials by delivery region
  • The gross and net profit which will be generated at the sell price
  • Price decision authority levels
  • The work to cash flow
  • Potential for up-sell, variations, volume benefits
  • Resource alignment and impact on scheduling
  • Management of variations and scope changes
  • Risk to achieving the expected margins – gross and net
  • The market’s expectations on price and other key components of the buying decision eg quality, time, ease of doing business
  • Impacts of known orders and pipeline business
  • Selection of pricing and costing (estimating) technology to efficiently support the activity
  • Harnessing, analysing and communicating actual pricing and costing data to inform decision making
  • Negotiating with the customer to achieve a better outcome rather than just price or cost

GI can collaboratively work with your organisation to help identify those areas where most value can be achieved through a better understanding of your pricing and costing situation and how it can add more value to your business. We are more than happy to have a no obligation discussion on a collaborative way forward.

To access a selection of GI’s pricing and costing resources click here.

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