Lesson Two
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Lesson Two
Now that you have your process guide all done and dusted, we can look into the actual costs for your business to run. We do this by assigning a cost for every part of your product/service until we have a total cost per item produced.
Let’s breakdown these costs so that we have a good understanding of what goes into them…
These are all of the things you have to pay for to make your product or service in completion. From when you actually get the order to when it is delivered – All of those costs need to be added in.
Start with the making of it. This includes all of the ingredients, raw materials, transportation to and from your house, electricity/water, and more.
Use your process guide you have made as a checklist to make sure you have included every single cost. This should include delivery of the order if you need to do so.
At the end of this, you should have a full list of all of your material costs for one item produced.
Next, we need to include a cost for the time spent making this product/service. Your process guide will show you how long it took to make the item and this is the timeframe you will start with.
You can charge any rate you want per hour, or a rate per item made – But this will be the profit you will make on an item sold. If all of your material costs are paid for, then this is where you make your profit.
Your time will become more valuable as you get more skilled at your job/function in the business. So when it grows to a point where you can’t increase your rate, then you can bring in other freelancers to do the basic function on your behalf. This will allow you to grow the business!
Now we can cover the topic of pricing!!!
Which item belongs under material costs?
