How to ensure profit after sale. How to avoid losses in business from day 1 ?
Above question is always in a mind of any Small Business Owner. Price is one of the common mistake a start-up can do.
Let me put an example and try to explain my point rather answer to the question .
For example a 200 ml bottle of carbonated cold drink can be manufactured for as low as 5 Rupees. But market price is approximately Rs. 15/-. Difference of whopping 300%.
Break up of a cold drink bottle cost:
70 paisa for water 200 ml water : Rs. (20 litter jar of top brand purified water comes for Rs 70/- thus 3.5 rupees per liter. And thus 70 paisa for 200 ml)
70 paisa for baking soda Top quality baking soda 100 gm pouch comes for 14 Rupees. Even if we use highest it can be 5 gm costing 70 paisa.
72 paisa sugar Sugar is 36 Rupees per Kg (1000 gm). If we use 10 gm sugar it would be 36 paisa. Assume use of 20 gm sugar on higher side.
2 rupee for coca powder 200 gm coca powder comes for Rs 150/- If 10gm is used it would be Rs 1.5.
1 rupee Bottle
Total of all is as below - 0.70 + 0.70 + 0.72 + 2.0 + 1.0 = 5.12 i.e. 5 Rupee 12 paisa.
Now question is how many start ups anticipate the costs which a cold drink manufacturer actually factors in ? I have made sample spreadsheet which highlights few important costs which a new business should consider before pricing their product. Spreadsheet shows how a cost of material of a product is Rs. 10 but actual cost to company is coming whopping Rs 1400/- .
Do check and use the checklist given below and let me know your experience after going through all the steps. It would hardly take 10 minutes.
How to download 1. Click on Download 2. Use password as abusiness. Tip: I have protected spreadsheet to prevent any accidental virus infection to the content. I hope you understand my concern and cooperate.
While I presented above award winning calculations, below objections got raised -
Objection 1: I do not have a office and any other thing to do ? I will sell at above manufacturing cost and gather maximum market share. Check the answer
Objection 2: I will increase the price after a test launch. Check the answer
Further Reading:
