Once upon a time there was a struggling business owner that needed that extra something that would leave his competitors in the dust. So he decided to have a huge sale that under cut everyone in the widget industry.
He decided that he would put his most popular product on sale for a little over his cost. The sale worked! He had a huge turnout and sold nothing but his most popular widget all week.
The ecstatic business owner went to see how much profit he had made. To his surprise, after paying his employees, the widget supplier, taxes and other bills he was worse off than when he started.
The owner was dumbfounded and didn’t understand. He had made a common mistake a lot of business owners do, he didn’t take into account the total cost of buy and selling his product. Yes, when you purchase your inventory or create a product there are certain costs that need to be factored into your pricing.
The overhead cost, is the cost of running your business and needs to be calculated; things such as, rent, taxes, payroll, utilities, etc. these thing need to be paid somehow.
The moral of this story: Don’t forget to account for this before you set your prices or think about having that once in a lifetime sale.
If you need help figuring out your overhead cost, call our office at, 915-857-8158, and we will be more than happy to help you out.