CoreBridge offers you the flexibility to set your pricing using Market-Based pricing, Cost-Plus pricing, or Custom Formulas.
Note: Cost-Plus Pricing is typically recommended for your business, but it’s important to weigh the pros and cons of each model as outlined below before setting up your components. To learn more about Custom Formulas—a more complex version of Cost-Plus Pricing—please contact supportdesk@corebridge.net.
Pricing Your Services
1. When deciding how to price your services, you want to consider:
A. Retail Price: What you normally charge your customers for services.
B. Total Cost: Your expenses for the services you provide (e.g., the people you hire, machines used, general overhead, etc.).
2. With this key information, you can use the following equation to find your Gross Profit. This will help you to better understand your business’s profitability and which pricing method to use.
Retail Price – Total Cost = Gross Profit
3. This table gives you a quick view of the differences between Market-Based and Cost-Plus Pricing.
Note: You can see a further breakdown of this comparison below the table.
| Market-Based | Cost-Plus Pricing | |
| Advantages | Simpler price calculations. Prices remain constant unless manually changed. | As costs are updated, prices are automatically and accurately updated. Easier to ensure that each order is profitable. |
| Disadvantages | Hard to accurately determine the margin or markup in relation to operating costs. Lose profitability if prices aren’t adjusted over time. Changes to costs and prices have to be adjusted manually. | Multiple factors to consider means more work to setup. Reasoning for price increases may not be clear enough to customers. Updated prices have to be overridden on individual orders if salespeople don’t want to use the new price. |
Market-Based Pricing
Market-Based (Area-Based, Square-Foot, Square-Meter, etc.):
You set the price as you see fit for customers.
Advantages:
- It’s simpler to calculate how much to price a job for customers.
Example: You can charge a flat price/fee for your products and services.
- Prices remain constant unless manually changed.
Example: If you have printed your prices in an annual catalog, the customer will have the same price throughout that year unless you manually update your pricing.
Disadvantages:
- Hard to accurately determine the margin or markup in relation to operating costs.
Example: If you’re using an arbitrary method of setting your price, it may not be covering your actual costs—which means you may not be achieving the margins you expected.
- Lose profitability if prices aren’t adjusted over time.
Example: If you’ve charged $100 for an item for the past 10 years and the cost to produce the item has gone up to $150 since then, you would lose money on that product if you don’t adjust your pricing.
- Changes to costs and prices have to be adjusted manually.
Example: If the cost of vinyl doubles, the price has to be manually changed on everything that uses that type of vinyl, or you may end up selling things for less than they cost to make.
Cost-Plus Pricing
Cost-Plus (Cost-Based): You choose what to factor into Cost (e.g., materials, equipment, different run speeds per job) plus the Markup or Margin applied on top.
Advantages:
- As costs are updated, prices are automatically and accurately updated.
Example: The cost of vinyl increases so you adjust the material costs, which automatically adjusts the price your customers pay.
- Easier to ensure that each order is profitable.
Operating costs (including payroll and overhead) are factored into the base price so you can always break even.
Example: If your costs = $100, and you choose a 100% markup (50% margin), you could charge customers $200.
- Your operating costs are covered.
- You still have $100 to offer discounts, cover other external costs (e.g., something happens during shipping you need to manage), or keep as profit.
Disadvantages:
- Multiple factors to consider means more work to setup.
Example: Gathering cost factors (e.g., operation costs for materials, equipment, different run speeds per job), fair markup for customers, competitive pricing, and testing realistic business scenarios.
- Reasoning for price increases may not be clear enough to customers.
Example: Customers who are used to paying a set price may not be aware that a price increase is due to an increased cost of materials.
- Updated prices have to be overridden on individual orders if salespeople don’t want to use the new price.
Example: Adjustments made to the cost at the component level will change the price for that component going forward. If a salesperson wants to give a client their old price of $100, and the new price is $150, they will have to override the new price each time they create a new order for that client.