1. www.caplus.org.uk Costing for funding applications and contracts – how much? Bedford 28 th June, 2011 John O’Brien Community Accounting Plus

2. www.caplus.org.uk Costs or price In the old ‘voluntary sector’ we work out the costs and ask people to cover them. In the ‘commercial sector’ we set a price and drive down costs to make profits. In the new voluntary sector commissioning world, we need to set a price that covers our costs.

3. www.caplus.org.uk Setting the price The price decision is complex – this session is about making sure you get it right and you cover your costs 3 types of pasta Price confusion – gas bills, special offers, 10% free.

4. www.caplus.org.uk Is it just a game… The American wine market Supermarket milk Website designers Buying a kettle Price is related to cost, but not exclusively.

5. www.caplus.org.uk It’s not a battle It is NOT about getting more money out of the funders or clients. It’s about the right amount of money. No one wins if the group is not financing its activities properly. Remember that the group need to recover the full costs, but not necessarily from the same source.

6. www.caplus.org.uk What am I worth? How much CA Plus should charge for one day of my time for consultancy work? How does CA Plus reach a decision?

7. www.caplus.org.uk Two questions to start off… 1. How much does it cost your organisation (per hour) for you to be here today? 2. Who is paying for you to be here now?

8. www.caplus.org.uk The product Different packages Introductory offer – one hour free. Loyalty – multiple services – buy one get one free? The competition Marketing So, what about the costs……. An example - The CA Plus Time bank

9. www.caplus.org.uk Know your costs ‘Direct’ costs are easy. These relate to the activity you are considering. If you were not engaged in this activity, they would be NIL Support costs are more tricky. Sometimes called ‘overheads’ or ‘core costs’ or ‘indirect costs’. They relate to all your activities.

10. www.caplus.org.uk Examples of Support Costs in CA Plus Staff supervision, training, subscriptions Senior staff reviewing the files, their own training, supervision, etc The equipment used such as IT, phones etc (what about depreciation?) Committee meetings The heating The audit fee The redecoration of the office every 5 years

11. www.caplus.org.uk Marginal and Average costs This is crucial and at the heart of this issue Marginal cost is the cost of doing one more thing Average cost is the cost of doing each thing. An example …..

12. www.caplus.org.uk Today ProjectABCTotal Costs direct10 30 shared44412 14 42 Grants14 42 Net result0000

13. www.caplus.org.uk A new project ProjectABCDTotal Costs direct10 40 shared44412 14 1052 Grants14 1052 Net result00000

14. www.caplus.org.uk Project B comes to an end ProjectABCDTotal Costs direct100 30 shared404412 140 42 Grants140 1038 Net result000(4)

15. www.caplus.org.uk What should you have charged funder D? Funder D has only paid for ‘marginal’ cost Total support costs were £12 before project D. They didn’t go up. The ‘average’ cost of project D could, and should, have included an amount for support costs. At £4, with project D, the group wins. When B closes, the group survives. At £3, with project D, the group wins, but when B closes, the group still dies.

16. www.caplus.org.uk What can you do now you know the full cost? If you know how much time you spend on each activity you can see the cost per hour You can move on to ask how you finance this activity…by grants, contracts, fees, fundraising etc If you charge fees for some services, you can see the minimum you should charge to break even.

17. www.caplus.org.uk Some theory perhaps…

18. www.caplus.org.uk Know your market - clients Ability to pay Different prices for different clients Price clarity or price confusion – who understands their gas bill? Client inertia

19. www.caplus.org.uk Know your market - competition Is there any competition Local, regional, national Talk to them, beat them, copy them, Find a unique selling point – quality?

20. www.caplus.org.uk Know your market - strategy Discounts to get people on board Loss leaders Cross subsidy Is the aim to cover costs or make profit?

21. www.caplus.org.uk Some tools to help These excel spreadsheet templates are available free from caplus….. email me directly: jo’brien@caplus.org.uk

22. www.caplus.org.uk Don’t forget What make our sector unique is that it is that the goal is to achieve our objectives. Yes we need to cover our costs – all our costs – but we don’t do things just because they are profitable So don’t sell your soul.

23. www.caplus.org.uk And finally If in doubt, call it £45 an hour