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How to Work Out a Selling Price for Online Business

Find your retail price for your product

It does not matter what you are selling in the online business whether it’s gifts, jewellery, clothing or even something in the service sector, if you have an online business using dropshipping. The retail price you charge will directly affect how your online business develops. Working out pricing may seem difficult, but in reality is clear-cut even when you work from home unique company names .

Your price has to cover costs and profit. It’s no use getting thousands of sales, but not making profit because you’re under charging. Some online businesses that work from Home price too low and fail to get enough revenue to give a profit.

The price should be sufficient to safeguard sales; if it’s expensive you will not get customers to buy from you. Check you’re pricing and ensure they reflect your costs, product demand, the competition and your objectives.

An efficient way to cut prices is to lower your overheads. If your doing the work from home instead of in a shop or office its ideal. When using a Dropshipping Wholesaler to supply your online business you can then work from home without the need to find somewhere to store the stock.

Before you start on your pricing structure, you need to determine the operation costs of your business, even when you Work from Home. To make sure you do not get into a negative cash flow situation your income has to meet all your expenditures which otherwise may diminish your financial funds leading to the collapse of the business. Using a Dropshipping wholesaler can increase cashflow by cutting down on purchasing and stocking products in the online business.

You need to calculate all your online business costs, even if you sat on the laptop doing your work from home, you still have business expenses, such as rent or mortgage payments, council tax, utilities, phone and you also need to allow for your profit, you haven’t set up an online business to make a loss..

There are 3 main types of expense. Product costs, fixed costs and Variable costs.

The product costs, is the cost of the goods you sold, even using the Dropshipping process you need to cover the cost of stock, once you have calculated this it will provide your gross profit margin. Wrapping and carriage costs should also be comprised within this total. This working out is imperative to your online business, because at this point it is not viable, your not going to cover the cost of overheads, even when you work from home. The cost of products will be a reflection of your sales; you need to monitor any increase in the cost of the products and adjust the sales price accordingly (or reduce other overheads)

The fixed costs include premises costs, depreciation, salary, utilities, insurance, professional fees etc. If you Work from Home you should still allow for a portion of household bills borne by the online Business, in line with the amount of space used while you work from home. Fixed costs do not change very much, even when the amount of sales fluctuate up and down.

The variable expenses can change on a month to month basis, variable expenses like office and stationary, telephone, advertising, shipping and transport. Even if your doing work from home you should do some marketing to get prospective customers to see you. As you sell more then variable costs should also go up, for example the stock you buy from a dropshipping wholesaler, then as you sell less variable costs will drop. Seasonal periods throughout the year can cause variable expenses to change. To calculate the average monthly costing, determine your yearly cost and then divide it by 12.

 

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