How Can You Achieve The Most Outstanding Success In Your Business?

Post 6 of the series from the “Business TODAY! on Mondays” series - Will Right Pricing Make Your Business More Profitable?

I have been asked how does a service business calculate the cost of supply when preparing a sales forecast budget?

Often a service provider, especially one who works from a home-based office, tells me that they don’t have any variable expenses or cost of supply. Every product, every service has a cost to supplying that product or service. It’s just a matter of understanding what those costs are.

Here are a few examples, which is a better way to explain this.

Take a hairdresser. The costs in providing their service may be: the shampoo and conditioner used on the customer, washing the towels, electricity to power dryers etc, commission paid to staff. It’s the costs that only occur when the service is provided.

A consultant would have their costs, such as additional petrol used to get to the client, time ($) in preparing a briefing, phone call costs, intellectual property – yes that is a cost as your knowledge is of value.

A training contractor may incur such variable costs as: workbooks, petrol, photocopying, certificates, butcher’s paper, accommodation, fares and intellectual property.

You can see from these examples that even for a service related business there are variable costs in doing what you do.

Look at everything you have to do in order to provide your service to that particular customer in that particular sale (over and above your normal business running duties), provide a value ($) to it and that becomes your variable expense.

Hope this helps.

All success.

Colin
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