Factors that Makeup Prices Analyzing Revenues, Costs, & Expenses

What is Price? Price is the value of money placed on a good or service. -Important factor that helps establish and maintain a firm’s image, competitive edge, and profits.

Factors that must be addressed in a price  Cost of Goods – Amount to purchase or produce goods to be sold  Overhead Expenses – Costs of operating a business.  Profit – Amount of money left over after costs and expenses are paid.

Revenue  Any money that is generated and flows into a business.  Most money in a business is generated through sales revenue  Price determines how much sales revenue is generated

Examples of Non-Sales Revenues in Sports Marketing  Sponsorship Revenues  Licensing Revenues  Interest Earned

Costs & Expenses Any money paid by a company to operate and maintain the business. Dollars that flow out of a business

Basic Business Formula Revenue – Costs & Expenses = Net Profit or Loss

Income Statement A financial statement that lists a company’s revenue & expenses to determine net profit or loss over a period of time. (Referred to as a company’s bottom line)

Break-even Point  Revenue = Costs & Expenses

Markup or Margin The amount of profit added to costs or breakeven point. Price – Costs(B.E.P) = Markup(profit)

Basic Pricing Formula  Costs + Markup = Price  Markup is usually expressed as a percentage.

Other factors Affecting Price  Competition  Quality/Image  Supply & Demand  Channels of Distribution  Promotional Discounts  Seasonal Discounts

The Main Goal of all Businesses Revenue > Costs & Expenses