When it comes to determining the price for your product or service, cost is the obvious starting point. It’s only after you have your costs completely nailed down that you can really start to make serious plans for pricing. With a clear understanding of your costs, you can quickly react to changes that impact your bottom line, such increased costs for raw materials or bringing on new employees.

On a basic level, costs are easy to identify. For instance, let’s say your company is a bakery that makes organic cookies and snacks. Ingredients will be one of your most obvious costs. It’s fairly easy to work out your per-unit needs for each ingredient, and to scale that up to the bulk price your supplier will charge. Continue reading →