Are you an entrepreneur who's selling things and want to set the right price for your products so that your business makes a profit? One of the easiest and most effective ways to set prices is by creating a product pricing calculator spreadsheet.
In this article, we'll guide you step by step on how to create one - alternatively, if you want to save time, simply buy our professionally designed Pricing Calculator templates to hit the ground running for your business. I'll shamelessly plug them below :)
Why You Need a Product Pricing Calculator Spreadsheet
Pricing your products correctly is crucial for the success of your business. If you price your products too high, you risk losing customers to your competitors. On the other hand, if you price your products too low, you risk not making enough profit to sustain your business. A product pricing calculator spreadsheet can help you avoid these risks by helping you determine the right price for your products based on your cost of goods sold (COGS) and desired profit margin.
What You Need to Create a Product Pricing Calculator Spreadsheet
To create a product pricing calculator spreadsheet, you will need a spreadsheet software such as Microsoft Excel, or Google Sheets. You will also need to gather the following information:
- The cost of goods sold (COGS) for each product
- Any additional costs associated with selling the product (e.g., shipping, taxes)
- The markup percentage you want to apply to the COGS
- The profit margin you want to achieve
How to Create a Product Pricing Calculator Spreadsheet
1. Set up your Spreadsheet
First, open a new spreadsheet in Google Sheets or Microsoft Excel and create 3 tabs:
- Materials: use this tab to list the production and packaging materials you use for your business. As you will likely buy these materials in bulk, use this tab to calculate the per unit costs of these materials.
- Product Pricing Calculator: this will be the tab where most of the magic happens. Use this tab to determine how much you should price each of your products, based on how much they cost and your ideal profit margin.
- Products: use this tab to track the final selling price of all your products vs competitors and their respective profit margins.
2. Calculate the Cost of Goods Sold (COGS)
Under the Product Pricing Calculator tab, calculate the unit cost of each product.
To figure out the unit cost of each product, you need to add up all the costs that go into producing one unit of the product. This includes the cost of materials, labor, and any other costs associated with producing the product.
For example, let's say you're selling handmade soap. To figure out the unit cost of each bar of soap, you would add up the cost of the soap base, fragrance oils, essential oils, colorants, molds, and any other materials used to make the soap. You would also factor in the cost of your time and labor, including the time it takes to mix and pour the soap, cut it into bars, and package it for sale.
Once you have all the costs added up, divide the total cost by the number of units produced to get the unit cost of each product. This will give you a baseline for setting your prices and determining your profit margin.
3. Determine the Markup Percentage
Next, apply a markup percentage. The markup percentage is the amount by which you increase the cost of goods sold to arrive at the selling price. The markup percentage can vary depending on your business and industry, but a common markup percentage is 50%. Input the markup percentage into the spreadsheet.
4. Calculate the Selling Price
To calculate the selling price, multiply the COGS by the markup percentage and add it to the COGS. The spreadsheet will automatically calculate the selling price for you.
5. Refine your Selling Price Based on your Pricing Strategy
A. Research Your Competitors:
Research your competitors' prices to get an idea of what the market is willing to pay for similar products. If your prices are significantly higher or lower than your competitors', you may need to adjust your prices accordingly.
B. Consider Your Target Market
Consider your target market when setting your prices. Are your customers price-sensitive or willing to pay a premium for high-quality products? Adjust your prices accordingly to meet the needs of your target market.
C. Set Realistic Profit Goals
Set realistic profit goals for your business. While it's important to make a profit, setting unrealistic profit goals can lead to pricing your products too high and losing customers.
6. Review and Adjust Your Prices Regularly
The competitive landscape changes and you will have to adjust with it. Track your competition using the 'Products' tab and adjust your prices regularly to ensure that you're pricing your products competitively and achieving your desired profit margin.
Creating a product pricing calculator spreadsheet is an easy and effective way to set prices for your products. By inputting your COGS, markup percentage, and profit margin, you can quickly and easily determine the right price for your products to achieve your desired profit margin.
If you want to save time and not create your spreadsheet from scratch, simply buy our professionally designed Pricing Calculator templates that are used by many other small business owners like yourself!