It is hard to believe that many businesses don’t know how to cost. I know, you are saying, “Vic is dreaming!” However, that’s not the case. In nine years of consulting I’ve found that many, most companies in fact, take their FIS (Free into Store) manufactured or even their direct hourly price and add a percentage which either they believe is what the industry norm is, a percentage someone told them, or they match someone else’s pricing without out knowing what their own fully absorbed costs are or what the circumstances of the other party is.
To cost properly one should calculate the fully absorbed cost, that is direct and indirect costs. This is the only way you will know your true expected profitability. Then comes the pricing of the product; here we are in a different world. A sage once said; “Costing is a science, but pricing is an art!”
Sales and the strategic planning and expedition of sales is the single most important thing any business can do.