Price & Financial Planning for Business Start-Ups
Price & Financial Planning for Business Start-Ups, 9th Class of ATU-Net Entrepreneurship. Price or pricing decisions, somehow, creates major challenges for many companies. Strategic roles of price is required to determine the price of the product itself. Dr. Sita Deliyana Firmialy, S.E., M.S.M, a lecturer of Telkom University presented material on Financial Planning for Business Start-Ups in the 9th class of the ATU-Net Entrepreneurship Online Mobility Program (06/11/2021). In her class, Dr. Sita covered some insightful outlines including:
- Strategic Role of Price
- Analyzing the Pricing Situation
- Selecting the Pricing Strategy
- Determining Specific Price & Polies
- Credit Strategy
- Financial Plan
Dr. Sita, in her presentation, mentioned 4 roles of price: 1) as a signal to the buyer; 2) as an instrument of competition; 3) as an improving financial performance; and 4) as marketing program consideration. After knowing the roles of pricing, we also need to analyze the pricing situation. See the cost of the products; the price we set must cover the whole production. See the competitors’ likely responses; we need to research our competitors’ price. See the pricing objectives and customer price sensitivity.
As an elaboration of those analysis on pricing situation, Dr. Sita mentioned 8 steps to better pricing:
- Assess what value your customers place on the product/service
- Look for variations in the way customers value the product/service
- Assess customers’ price sensitivity
- Identify an optimal pricing structure
- Consider competitors’ reaction
- Monitor prices realized at the transaction level.
- Assess customers’ emotional response
- Analyze whether the returns are worth the cost to serve.
There are actually two types of costs, explained by Dr. Sita: Fixed Costs and Variable Cost. Fixed costs are costs that don’t vary with sales or production levels, while variable costs are costs that do vary directly with the level of production.
Price Adjustments Types
In setting the price, we need to make sure that our price is not in the low price because there no possible profit we gain in this price. Likewise, make sure that our price in not in the high price because there no possible demand of our products at this price. Our price must at least in the range of competitors’ prices and prices of substitutes. This will make customers see or assess the unique product features of our products and the competitors’ products.
We also need to also establish pricing policy and structure including the discounts, allowances, returns, product mix & line pricing relationship, and other operating guidelines.
Thus, we can adjust the pricing based on several types:
- Order size (quantity discount)
- Annual, quarterly, or monthly volume discounts/bonuses
- Dealer and distributor discounts
- Promotion discounts and bonuses
- Merchandising discounts
- Co-op advertising and marketing allowances
- Products rebates
- Exception discount
- Freight/shipping allowance
Don’t forget to always analyze the price adjustment. There are two types of analysis: 1) pocket price is what remains after all pricing factors, such as discounts and allowances, are deducted from the list or invoice price to reach the final price; pocket price band is range of prices for a given unit volume of a particular item at a given point in time.
As the last topic, financial plan is one of the crucial point in creating business or startups. Make a financial plan as a blueprint outlining your current money situation and long-term financial goals to create a strategy for pursuing them.
That’s the highlight of the 9th class of the ATU-Net Entrepreneurship Online Mobility. Stay tuned for the next update of upcoming ATU-Net Class.(IO)***
