Business Tips: Pricing, Part 1

Setting the right price for your product ensures that you cover your costs, earn a profit, and remain competitive in the marketplace. There isn't a one-size-fits-all "best" formula, as the optimal pricing strategy depends on various factors such as production costs, market conditions, competition, and customer perception. Over the next few weeks, we will discuss the benefits of a few different types of product pricing so you can decide which is better for your business.

1. Avoid the Competitor Price Trap While competitor pricing can serve as a starting point, don’t simply copy it. You might not be aware of their specific overhead costs and cost of goods, which could lead to pricing that doesn’t cover your expenses or devalues your offering. Instead, use competitor prices as a starting point and adjust based on your unique costs and value proposition.

2. Master Cost-Plus Pricing with a Strategic Twist Cost-Plus Pricing is straightforward—add a markup to your costs. But to elevate this method, incorporate your desired profit margins. This approach not only covers your costs but also aligns with your profitability goals and positions your pricing effectively within the market landscape.

3. Embrace Profit Margin Pricing for Flexibility Go beyond basic cost calculations by adopting Profit Margin Pricing. This method considers your costs, desired profit, and the broader market conditions, allowing you to adapt to changes in consumer behavior and market trends. It provides the flexibility needed to stay competitive and responsive.

Let's start with how Cost-Plus Pricing works,

Let’s use a candle store that sells 500 candles a month as an example.

Cost-Plus Pricing Formula:

Retail Price = Total Cost per Candle + (Total Cost per Candle × Markup Percentage)

Cost of Candle: $5.50 per Candle, includes: wax, wick, oils, containers, and packaging.

Now, let's factor in the overhead costs like rent, utilities, and labor.

Indirect Cost per Candle: $14

Total Cost per Candle: $5.50 (direct) + $14 (indirect) = $19.50

Markup Percentage: 50%

Retail Price: $19.5 + ($19.5 × 0.50) = $29.25 per Candle

So for the candle store to make a profit that covers all of its expenses, it needs to charge a minimum of $29.25 per candle if selling 500 candles a month. The thing to watch out for is that the direct costs will traditionally stay the same. There will be some inflation through the years that you'll need to account for, but that's for another day. The things to be mindful of when pricing your product are the variables in the indirect costs. Let's say the business only sells 250 candles instead of 500. Watch how the numbers fluctuate for the labor and the indirect costs.

Indirect Cost per Candle: $24

Total Cost per Candle: $5.50 (direct) + $24 (indirect) = $29.50

Markup Percentage: 50%

Retail Price: $29.50 + ($29.50 × 0.50) = $44.25 per Candle

As you can see after running the cost-plus numbers, the difference highlights the challenge of maintaining profitability when sales volumes fluctuate. Continuously changing the candle price based on how many candles are sold isn't practical or sustainable—it can confuse customers and disrupt the business.

Next week, we'll talk about Profit Margin Pricing. Taking Cost-Plus Pricing and Profit Margin Pricing will give you a good idea of the range of prices you need to stay profitable. I used this pricing to make sure I stayed in line with my competitors, but I also needed to ensure my business costs would be covered even during slow times. Make sure you're subscribed to our email list to be the first to know about our blogs and business tips.

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Get Your Books in Shape: Cyber Monday Sale at Purple Elephant Group!

It’s the most wonderful time of the year—and not just for holiday shopping! This Cyber Monday, we’re unwrapping huge savings for business owners looking to start the new year off right. 🎁

Here's What We’re Offering:

🌟 Up to $300 Off Bookkeeping Cleanup ServicesLet’s face it, tax season is creeping up fast. If your books are a little (or a lot) behind, now’s the time to get them back in order. With this Cyber Monday deal, you can save up to $300 on a bookkeeping cleanup. We’ll get your finances straightened out so you can file your taxes with confidence and avoid those dreaded penalties.

🌟 One Month Free for Monthly Bookkeeping ServicesJust starting your business? Congratulations! 🎉 To help you get going on the right foot, we’re offering one month free when you sign up for our monthly bookkeeping services. Whether it’s tracking expenses, managing invoices, or keeping your accounts in tip-top shape, we’ve got you covered.

Why Bookkeeping Matters

If you’ve been putting off organizing your finances, you’re not alone—but here’s the thing: messy books can cost you big time. Accurate records help you:

• Save money on taxes by identifying every deductible expense.

• Avoid fines and penalties for missing deadlines or filing incorrectly.

• Understand your business’s financial health so you can make better decisions for growth.

At Purple Elephant Group, we make bookkeeping easy, stress-free, and tailored to your unique needs.

How to Claim Your Cyber Monday Deal

This Cyber Monday offer has limited spots available! 🕒 Here’s how to snag your discount:

1. Schedule a discovery call.

2. Mention the Cyber Monday Sale to lock in your savings.

3. Let us take care of the rest!

   
   

Don’t Wait—Your Business Deserves It!

These deals disappear faster than leftover pie at Thanksgiving. Don’t miss your chance to save big and start the new year with your books in perfect order.

📅 Cyber Monday Sale Ends December 2nd at Midnight!

Get your books ready for tax season, save money, and set yourself up for a successful year ahead with Purple Elephant Group.

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Essential Tax Write-Off Checklist for Business Owners

Tax season is the perfect opportunity to take advantage of business write-offs that maximize your savings and keep more of your hard-earned profits. But not all expenses are created equal, and it's essential to focus on deductions that benefit your business. Here’s your ultimate checklist for tax write-offs that add real value, plus tips to make your write-offs count!

1. Office Expenses

Home Office Deduction: If you have a dedicated home office, you can claim a portion of your home expenses, such as rent or mortgage interest, utilities, and maintenance.

Office Supplies: Common items like paper, pens, and postage are deductible if used exclusively for business.

Furniture and Equipment: Desks, chairs, computers, and other office essentials are eligible for write-offs, though high-cost items may need to be depreciated over time.

2. Technology and Software

Computers, Phones, and Tablets: Devices used for business qualify as deductions.

Software Subscriptions: Tools like accounting software, project management systems, or graphic design platforms are eligible write-offs.

Website and Domain Expenses: Hosting, domain registration, and maintenance fees for your website are deductible.

3. Professional Fees and Services

Legal and Accounting Fees: Expenses for legal advice, bookkeeping, and accounting services are deductible.

Consulting and Professional Development: Fees paid to business coaches, marketing consultants, or industry-specific trainers can be written off if they directly contribute to business growth.

4. Marketing and Advertising

Social Media and Online Ads: Paid ads on social media or search engines are eligible write-offs that can boost your business visibility.

Branding Expenses: Logo design, website development, and other branding-related costs qualify for deductions.

Promotional Materials: Printed materials like business cards, brochures, and branded swag are deductible marketing expenses.

5. Business Travel and Meals

Travel Costs: Expenses for flights, hotels, and transportation during business trips are deductible. Just keep detailed records to validate these write-offs.

Meals: Business meals qualify for a 50% deduction. Remember to note who was present and the business purpose of each meal.

6. Employee and Contractor Costs

Wages and Salaries: Employee wages, salaries, and bonuses are deductible business expenses.

Contractor Payments: Payments to freelancers and independent contractors are eligible write-offs, making it easier to expand your team without hiring full-time staff.

Employee Benefits: Benefits such as health insurance and retirement contributions are often deductible, reducing your tax burden while supporting your team.

7. Vehicle Expenses and Mileage

Vehicle Expenses: If you use a vehicle for business, you can write off costs like gas, maintenance, and insurance. Be sure to log business usage separately if it’s a personal vehicle.

Mileage: Alternatively, you can take the standard mileage deduction, which tracks your miles and applies a per-mile rate for business travel. Use a mileage-tracking app for accuracy.

8. Rent and Utilities

Office Rent: Renting office space allows you to deduct the full rental amount as a business expense.

Utilities: Utilities like electricity, water, and heating for business locations are deductible. For a home office, a percentage of home utility costs may be deducted.

9. Education and Training

Courses and Certifications: Training or certification courses that improve skills related to your business are deductible.

Books and Online Resources: Industry-specific books, trade publications, and online subscriptions relevant to your field can be written off.

10. Insurance Premiums

Business Insurance: Policies such as liability or property insurance that protect your business are deductible.

Health Insurance: Self-employed individuals can deduct their health insurance premiums, offering some relief on personal healthcare costs.

Tips for Managing Your Write-Offs

A checklist is a great start, but keeping your write-offs organized and making them work for you requires a few extra steps. Here’s how to make sure you’re getting the most out of each deduction:

1. Keep Detailed Records: Save receipts, invoices, and bank statements related to every business expense. Detailed records help you claim deductions confidently and provide backup in case of an audit.

2. Track Mileage and Travel: Use a mileage-tracking app to record business travel and keep all receipts for trips. This is especially helpful for maximizing travel-related deductions.

3. Consult a Tax Professional: As a tax advisor we can identify additional deductions, guide you through complex write-offs, and ensure your tax strategy is as effective as possible.

4. Prioritize High-Impact Deductions: Focus on write-offs that bring genuine value to your business rather than chasing every small deduction. This approach will keep your profits intact and simplify tax season.

5. Review Your Deduction Strategy Annually: Every year, review your tax strategy and write-offs to ensure you’re making the most of available deductions and adapting to any new tax laws or changes in your business.

With these essential write-offs and tips, you can approach tax season with confidence and clarity. Remember, every deduction should support your business goals and long-term profitability. Thoughtful planning and strategic spending can keep more dollars in your business and make tax season a breeze.

Ready to make tax season work for you? If you’d like help identifying your best deductions and optimizing your tax strategy, reach out today. We’re here to help you make every dollar count!

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