Monday, March 30, 2009

Product Cost

Helping a client understand what their product or service costs, is high on the list of valuable CFO Services.

Understanding product cost which includes the components of cost is very important to a business owner in order to price their product properly. I have had several clients who did not understand the cost of their product or service and actually sold their product or service for less than its true cost. Once the actual cost of the product was understood profits were being made. Another reason why it is important to understand product cost is controlling that cost. The only way you can control or reduce a cost is if you understand that it exists. If you do not know if a cost exists or what the cost is there certainly isn't any way you can work to reduce it or control it.

Understanding what a product or service costs is the first step in understanding how to price your product and have the proper knowledge of how competitively priced you can be. It also helps to reduce the risk of business ownership.