How to Price Your Services to Make a Profit

Experienced marketers know there are all sorts of pricing strategies designed to lure in customers. But if you’re new to the sales game or if you are wondering whether or not you can afford to open your business, you may be wondering how to set a price for your services.

You could simply take a survey of your competitors and then try to undercut their prices, but not accounting for all your costs can quickly lead to financial disaster. Most businesses fail because their expenses exceed their income and they don’t manage their cash flow.

There is a basic formula for setting appropriate prices. It’s sometimes called a “cost plus” formula, and here it is:

Cost of Services + Overhead Costs + Buffer + Desired Profit

The Cost of Services should be easy enough to figure. That should take into account the hourly rate of the worker(s) who will perform the services, plus the cost of any goods consumed or delivered by the service.

Overhead Costs get a bit trickier, because those are the ongoing costs of running your business. In this category, you need to include a percentage of expenses such as leasing or purchasing buildings and equipment, maintenance and utilities, salaries of support staff, taxes and insurance, and so forth. After you know your annual or monthly cost for overhead, then you should divide this total cost into an hourly cost and assign that to each hour of service to fill in the Overhead Costs in the formula above.

So now you have your basic costs defined: Cost of Services + Overhead Costs. What’s the Buffer? A buffer is a percentage of the total expenses, added as “padding” or “insurance” to account for unplanned problems that even the most experienced businesses encounter. These might include scheduling issues, unexpected component price increases, accidents, illness, and so forth. The percentage you choose for a buffer is up to you and depends on the type of business you’re in. Some businesses add a buffer of 20%; others add 100%.

And finally, you need to determine your Desired Profit percentage. In other words, how much profit do you need or want to stay in business? Now, adding all these figures together, you should arrive at a price for your services.

After you have worked out a price that guarantees you will not lose money, it’s time to compare that price against the local competition. Is your price much lower than the competition? Then you may want to examine your costs again to be sure you’ve included everything. Many new business owners forget to include the costs of processing the paperwork for a job, for example, or they haven’t made the buffer percentage big enough to cover unanticipated events.

If your price came out higher than the average, don’t panic. Keep in mind that customers may not always choose the lowest price. Compare your services to your competitors. Do you offer additional services, have more experience or industry awards, or offer a guarantee or a warranty that your competitors don’t? If yes, then these may serve as "value added" components to justify a higher price, but then you need to highlight these benefits in your service proposal to inform your potential customer about why you are the best pick for the job.

However, if your price calculation came out with a total that is significantly higher than your competition, you may need to consider where you can cut costs. You may be able to balance the below-cost sale of one service by combining it with a profitable additional service. (The product or service sold below cost in this way is known as a “loss leader.”) There are all sorts of strategies for expanding markets and attracting customers, but it’s crucial to always keep your eye on the bottom line. Knowing your financials inside and out is one of the keys to running a successful and sustainable business.

If this all sounds a bit overwhelming, you should know that you don’t have to start from scratch. There’s a product that can help you determine prices and create proposals and other materials to market your services to your customers. Proposal Kit, like the name implies, is designed for writing business proposals of all kinds. You can use it to fire off simple job descriptions and estimates, or to plan and bid on complex projects with multiple deadlines and subcontractors and such. The product contains multiple checklists and spreadsheets you can use to help capture all the fine details that sap your profits, such as hidden overhead costs you might not think of adding.

Proposal Kit’s checklist worksheets include a Bid/No-Bid Checklist, a Proposal Development Checklist, and a Task Assignment Progress Report, just to name a few helpful ones. And here are just a few of the dozens of spreadsheets contained in Proposal Kit: Price Structure Calculator, Fee Structure Calculator, Quote Calculator, Estimate Calculator, Purchase Order Calculator, Services Cost Calculator, and Project Cost Summary Calculator.

There are also calculator spreadsheets you can use to project cash flow, to figure profit and loss, to analyze return on investment, to create invoices, and so forth. Each financially oriented template in Proposal Kit has an associated spreadsheet for you to fill in.

Proposal Kit has over a thousand topic templates so you can include all the information you should to convince a prospective customer. For example, there’s a template for a Warranty and one for a Guarantee, and templates for Company History, Testimonials, Referrals, and almost any other topic you can imagine. Each template contains suggestions and examples to help you efficiently describe that topic in your proposal.

Proposal Kit not only helps you create a complete business document, but the product helps you assemble an attractive one, too, because the template pages are professionally laid out and come in various design themes, so you can choose the perfect style to represent your business, or use your own logo.

As well as offering you hundreds of templates and spreadsheets, Proposal Kit also contains over a hundred sample proposals, so you can see what a proposal for your type of business might look like. You’ll find that Proposal Kit has already done a lot of thinking and planning for you—all you need to do is supply the specific facts and figures for your business and your project. It’s a great tool to help you not only figure out the right prices for your services, but to ensure your business success.

How to Write an Instruction Manual or Handbook

Have you been assigned the job of creating an instruction manual or employee handbook? Are you wondering how to go about accomplishing this task?

Don’t panic. You probably already know all the information you need to include, or at least you know where to find it. Now all you need to learn is the process and the structure.

To start, write a description of the audience your manual or handbook is intended for. What do they know already? What do they need to learn? What are their goals? What are the goals of the manual or handbook? You may want to discuss this audience description and goals with colleagues or your boss to make sure you’re including everyone and planning to meet the needs of the organization.

Next, make a list of all the topics you need to include. Do these topics need to be in a specific sequence to be understood or learned? In other words, does one section build on information learned in the previous section? Or do topics / procedures need to be grouped by category, such as “Employee Benefits” or “Troubleshooting Procedures”? If so, order your topics accordingly. Then share your outline with others and request their input to make sure you’ve thought of everything. Get approval if needed. This outline will become the basis for the table of contents in your manual. Now you’re ready to get started writing the body of your manual or handbook.

Although you could write in any sequence to fill in your outline, we’ll start at the beginning. First you’ll need a Title Page with a descriptive name, like “How to Use the ZYX Printer” or “Smith Corporation Employee Handbook.” Next should be a copyright page, which should contain the date of printing and information about ownership by the author, company, or publisher. This page sometimes includes disclaimers, such as a statement saying the publisher and author are not responsible for misinformation that might be included or for any information that was left out. If you find you have a lot of disclaimers or a lengthy legal explanation, you should put that on a separate Disclaimers page.

Next will be your Table of Contents, but the odds are that you will need to create and insert that after you have completed writing your manual, so for now, just keep in mind that it belongs here.

The first page you will probably want in the body of your manual is an Introduction, where you’ll explain the purpose and goals of the document. You can also include here any assumptions you are making, such as that all your readers are using a specific operating system or that they are familiar with standard medical devices, for example. If you need to list a lot of Assumptions, include them on a separate page.

Now you’re ready to write the main content of your manual or handbook, with all the procedures or topics your readers need to know. After you’ve written all your topics, you may want to end with a Conclusions or Summary page, and perhaps include an Index to help readers find easily find topics.

Does that sound like too much work? Keep in mind that you don’t need to start off with a blank word processing screen to do all this. There’s a product that can help tremendously: Proposal Kit. As the name implies, it’s perfect for writing proposals, but it’s designed for all sorts of “how-to” and informational materials, too. Its templates can give you a big jump start on creating your manual, and help you at each step along the way. Each template contains suggestions and examples of information to include on that page.

There are more than a thousand topic templates, including templates for all those pages mentioned above. You can probably find precisely the topic you’re looking for, but if by chance you don’t, Proposal Kit contains blank templates that you can adapt for any purpose. For employee manuals, there are many company-oriented topics like Mission Statement, Organizational Structure, and Ethics, just to name a few. The templates are Word documents, so you can easily adapt them for your use, and you can insert graphics like charts, illustrations, and photos.

Any manual or handbook is likely to be read by a large audience, so you want to be sure that the grammar and spelling are perfect. It’s always best to use a professional editor if you can, but if that’s not in the budget, then enlist someone who is not familiar with your manual’s content to proofread it. Testing is an essential component of finalizing any “how-to” or informational booklet, too. You want to be sure that your instructions are clear, complete, and useful for your intended readers. You might also need to get the approval of your company’s legal department before publication, too—corporate attorneys and personnel departments are often concerned about employment issues, trademarks, and all sorts of consumer information that may cause legal issues in the future.

Proposal Kit is perfect for assembling any kind of Word document. Using the included Wizard software, you simply pick the templates you want and fill them in, and then let Proposal Kit do the page numbering and create a table of contents for you, as well as take care of the cover page and any appendices. The product handles the layout and design of your manual, so Proposal Kit not only helps you write like a professional, but also makes your finished work look professional, too.

Your final manual or handbook can easily be printed and bound, or transformed into a PDF file to send via email or read on any electronic device. You can even use various tools available on the internet to translate your masterpiece into an e-book for use with Kindle or other electronic devices.

You’ll find that Proposal Kit is great for producing and organizing any kind of document. It’s a powerful addition to your arsenal of office tools.