1. Costing & Pricing Successful social enterprise

2. The difference between cost and value the cost of your product or service is the amount you spend to produce it price is your financial reward for providing the product or service the value is what your customer believes the product or service is worth to them

3. Fixed and variable costs  fixed costs are those that are always there, regardless of how much or how little you sell, for example rent, salaries  variable costs are those that rise as your sales increase, such as telephone costs, cost of processing increased transactions

4. Costing – what to include  Start up costs  Fixed costs  Variable costs  Organisational overheads

5. Costs - Nail cutting example  Capital costs  Equipment  Set up costs including development staff  Salaries  Training/Travel/Subsistence  Office costs  Marketing  Insurance  Organisational o/h

6. Staff  Service manager  Nail cutters  Administrator  Plus % input from other people in organisation – finance, IT, marketing

7. Set up phase  Preparation will be key  You will need to recruit and train staff  Train them  Develop your systems  Set your charge  Market the service

8. Volume – example toenail cutting You need to work out  How many staff you will have cutting toenails  How many hours a day they will work  How many days a year they will work (allowing for holiday/training/sickness etc)  How many appointments they can do per hour

9. Pricing is a living thing Pricing is not a separate activity It should be part of any strategy you have Don’t wait till the end to bring the finance officer in

10. The third sector and pricing How many times do you hear staff or volunteers say “I’m sorry but we do have to charge” Or “Unfortunately we do charge for this service” Why do we apologise? And what impression does that give?

11. You need to know the criteria your customers use for buying decisions - for example convenience or reliability what value your customers place on receiving the benefits you provide i.e. how important is it to them? what benefits your customers gain from using your product or service What your competitors charge

12. Cost plus v value based pricing Cost-plus pricing  This takes the cost of producing your product or service and adds an amount that you need to make a profit. This is usually expressed as a percentage of the cost.  More suited to businesses that deal with large volumes or which operate in markets dominated by competition on price e.g. Home care because it is all about charging as low a price as possible

13. Value based pricing  This focuses on the price you believe customers are willing to pay based on the benefits your business offers them.  Value-based pricing depends on the strength of the benefits you can prove you offer to customers.  If you have clearly-defined benefits that give you an advantage over your competitors, you can charge according to the value you offer customers.  It can alienate potential customers who are driven only by price and can also draw in new competitors.

14. Building your pricing strategy  Decide whether to use cost-plus or value-based pricing.  Find out what your competitors offer and what they charge.  Do not set your prices too much higher or lower than competitors without a good reason.  Perception of your product or service is also important. A high price can contribute to the perception of your product as being of premium value. This might encourage customers to buy from you - or it might deter price-conscious customers.

15. Building your pricing strategy cont  It can be useful to charge different prices to different customers, eg to customers who purchase repeatedly, or buy add-on or related products, as a thank you for their loyalty.  You can also use pricing tactics to attract customers.  Whatever prices you set, check that they cover your costs and can deliver a profit.

16. Pricing tactics  Discounting e.g. buy 10 sessions and get 2 free  Odd value pricing  Price banding  Skimming  Penetration (loss leaders)

17. Remember There are no right or wrong prices only the right or wrong reasons for charging them