The Elements of the Right Price | HVAC Pricing Series Part 8
The Right Price Must Cover Direct Costs, Overhead Costs and Profit
The Whole Pie Chart Below Is the Right Price
The Whole Pie = The Right Price = 100%
Assumptions: Direct Costs = $2000
Overhead Costs = 28%
Profit = 10%
The Right Price = Direct Costs + Overhead + Profit
The Right Price (100%) = $2000 (?%) + 28% + 10%
Therefore: The Right Price – Direct Costs = Overhead + Profit
The Right Price (100%) – $2000 (?%) = 28% + 10%
And: The Right Price – (Overhead + Profit) = Direct Costs
The Right Price (100%) – (28% + 10%) = $2000 (?%)
100% – 38% = $2000 (62%)
OR
100% – 38% = 62%
Therefore: Direct Costs are 62% of the Right Price
former Vice-President of Sales and Marketing – Retired at cfm Distributors, Inc.
Cal is a former Vice-President of Sales and Marketing for cfm Distributors with over 30 years’ experience in the HVAC industry.Now retired, he still assists cfm as an educational helper in HVAC product knowledge and marketing.
Latest posts by Cal Berry (see all)
- How Many More Sales Dollars Do You Need To Cover An Expense? | HVAC Pricing Series Part 14 – December 23, 2019
- How Do You Raise Your Prices? Part Two | HVAC Pricing Series Part 13 – December 9, 2019
- How Do You Raise Your Prices? | HVAC Pricing Series Part 12 – November 25, 2019
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