VALÉRIE DORAN, PRESIDENT AND FOUNDER OF BULLE BIJOUTERIE

At a young age, Valérie Doran made her own jewelry and sold it at craft kiosks or at her own events. Stars would inevitably light up in her eyes when she discovered the careers of entrepreneurs driven by passion. Her career as a human resources management advisor for the government was going well when this need to create returned to make itself felt in an irrepressible way during her second maternity leave. “Having children pushed me to redefine myself in relation to what I was doing before,” she observes. “I wanted to build a project from point A to point Z. The idea for chewable accessories came from my children and they continue to inspire me in the creation of new products.” In addition to jewelry for mothers and toys for babies, a range of chewable accessories for anxious children or those living with autism spectrum disorder or ADHD was added over time. The young entrepreneur and mother of three is now preparing to expand her sales network (which includes 600 points of sale) in English Canada, the United States and Europe, thanks in particular to a new Web platform.

4 STEPS TO CALCULATE YOUR COST COST AND YOUR SELLING PRICE

Solutions from the Quebec School of Entrepreneurs

Determining the precise cost price of a service or product (the "cost" price) is crucial for the profitability of a company. It is from this cost that it is possible to establish a fair selling price.

Here's how to calculate it in 4 easy steps.

Setting your selling price

Again, several factors come into play when it comes to setting your selling price.

As an entrepreneur, we often have the reflex to set net profit objectives and set our margin (the difference between the selling price and the cost price) according to our ambitions. Be careful! We should rather proceed in the opposite way: consider what margin is realistic in order to then establish our sales objectives. To do this, considering the practices of your industry with regard to margins will help you remain competitive.

Back to our swimsuit, if our cost price is $40 and the industry standard is that selling prices are set at 4 times the cost price, then you get a price of $200 for a swimsuit. Will you be able to sell your product at this price?

These margin standards are provided as an indication of course, since one must also consider one's production capacity. A higher margin is often necessary if our production capacity is low.

Calculate your direct costs

Direct costs arise from the process of manufacturing a product or providing the service. Consider a swimsuit company. Let's calculate the sourcing costs, which are the cost of the fabric, thread, and elastic used to make one unit, or swimsuit. Also consider the cost of packaging.

Add to this the costs of creating and producing that same unit, such as the labor for its manufacture.

If we offer services, this basic cost is the actual cost that we charge for an hour of this service. We speak of "actual" cost because behind this billable hour there are usually other hours of work (salaried hours).

Add your indirect costs

Indirect costs are related to the operation of the business in general: rent, telephone, heating, travel, but also accounting, graphic design, marketing and advertising costs. A long list to draw up!

The challenge is to reduce this overhead to its base unit, that is, to the lowest denominator of our products or services. In our previous examples, it is a swimsuit. So what percentage of the rent can be attributed to a single swimsuit?

Another tip is to think in terms of time. The production time for a jersey is estimated at 30 minutes. How much is 30 minutes of your rent worth? This amount will be added to our unit cost.

Here is a matrix in Excel format that will help you calculate your cost price.

Calculate losses and other charges

Why do profit margins differ from one industry to another? In particular, because losses incurred must be included. In the bio-food sector, for example, these losses are large given the nature of perishable products. The margin must therefore take these losses into account.

Ultimately, you will also need to calculate the costs related to tax or interest on a loan to be paid.

To learn more about cost price, here is the “ Cost price and decision-making ” tool developed by the Ministry of Economy and Innovation which goes into more depth. » sizes= »(max-width: 900px) 100vw, 900px » alt= » » width= »900″ height= »600″ data-src= » https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-300×200.jpg » data-srcset= » https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-300×200.jpg 300w, https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-768×512.jpg 768w, https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-1024×683.jpg 1024w, https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-640×427.jpg 640w, https://henkelmedia.com/wp-content/uploads/2019/01/sarah_retail_interior_4460x4460-150×100.jpg 150w » />