How much money has your company lost over the past year due to improper pricing?
Have you recently been in a situation like one of these? – A large retail chain wants to place a large order with your company but at a ridiculously low price. Or, let’s say, you need to go down the price in a tender, but you do not know low can you afford to go. Or maybe you just price your products based on what the market allows without delving how beneficial such orders are for you?
It is good, when a company has a CFO experienced in doing such calculations. Even better, when the CFO has experience in other industries and can bring home some useful cross-industry experience. However, in most cases, a CEO of a company, especially an SME, just delegates the calculations to his accountant (who is already overloaded with regular work), or tries to do make some calculations himself.
As a result, the CEO receives a confusing set of numbers. In addition to that the CEO intuitively does not fully believe that the costs are counted correctly. As a consequence, wrong decisions are often made. For example, going too low on the price and realizing losses with each item that’s being shipped. Or other way around, not using the possibility of reducing prices far enough and missing a potentially profitable deal to competitors that are better at calculations.
Certainly, every CEO of a manufacturing company sometimes regrets that he is not engaged just in a retail business. It might seem so simple for the retailers – just add a mark-up on top of your purchase price. But we in AG Capital have proved in practice many times that cost analysis for the manufacturing companies can be as quick and efficient as in retail.
It’s been more than 8 years that we implement automated cost analysis models for the manufacturing, construction and wholesale industries. Our models take into account the specifics of your company, the product range and even the competition level on the market. And what’s important – AG Capital’s cost analysis model gives credibility to the results!
Working with the model is easy and simple. The mechanics for the model were developed by our founder & CEO Andrew Grigolyunovich, CFA, #12 in the current world rankings for the development of such models. You will be able to automatically update the costs on a monthly basis the costs. Furthermore, these calculations are ideally suited to justify price increases in negotiations with your customers.
- Calculation of direct costs by products (the cost of raw materials, salaries, production personnel, and others);
- Attribution of indirect costs by product, in accordance with the principles defined by you, (e.g., assigning the uniform mark-up coefficient to variable costs);
- Ability to adjust the attribution of indirect costs, depending on the product group. It is very important for certain groups of products where the company faces strong competition and is forced to offer the lowest possible price. In this case, fixed costs may be offset by other product groups;
- Minimum price calculations;
- Economies of scale calculations – how the full cost of each product changes with sales volume;
- Inflation effect calculations – how the price of each product changes when raw material prices or wage levels change;
- Ability to identify loss-making products and sales channels;
- Automatic data input – the data will be automatically imported from the accounting system.
How much money is your company losing due to improper pricing? How much would You be willing to pay to get accurate cost estimates and not to hire a full-time cost accountant?
We are confident that these amounts are much higher than the investment in the cost analysis model – from 1,000 to 3,000 euros (depending on the complexity of the processes). An additional advantage – when developing the model, our specialists will have to dig deep into the business processes of Your company. It is possible that during the project we will find cost optimization options and you will recover your investment into the model even before it is launched!
If You want to work with the proper prices and find out how we can help You earn more money – write us to firstname.lastname@example.org and we will arrange a call.
We have made a demo model available for download so that you could review it:
Cost analysis – demo