This is a very important calculation for any business because it is a way of working out the level of business or sales required to enable it to meet all the costs of doing business.
For a budding entrepreneur or an employee looking to leave their job to start their first business it can be the green light that encourages them or the red light that tells them to think again.
In every business there are pluses and minuses. Some of these (Strengths and Weaknesses) apply to the internal aspects of the business and others (Opportunities and Threats to the environment in which the business operates. Examining these and deciding how to deal with them is a key issue for business owners. This fact sheet talks you through some techniques of doing this with examples.
Setting too high a price for your product or service can lead to lost sales. Undercharging can eat into your profits and possibly result in you being unable to deliver on your contracts. The prices you charge should reflect your costs on the one hand, and the strength of the market on the other.
This factsheet provides guidance about the things you should take into account when setting your prices, and the other calculations you should make to benefit the sales and profitability of your business.