Businesses must earn a profit on sales in order to be successful.

The end. (Wasn't that a nice, short article?)

Part Two: How to Earn Profits

Buy low, sell high.

The end. (Isn't this easy?)

Part Three: How To Buy Low and Sell High In The Plumbing Business

(Now the fun begins)

Profitable Pricing is the key to earning a profit in your business. Some may say you need to control overhead, others believe in effective marketing, still others may say that increased sales is the solution. Without proper pricing, none of these important areas will help your business succeed. Here are some points to consider:

A profitable price for your goods or services must include all of the following:

Cost of goods sold.
Cost of overhead to support and deliver the goods.
Profit.

If you leave out any one of these items, you will not profit. Few businesses flourish by losing money.

In the Plumbing Profession, we're usually pretty good at including the "cost of goods sold" in our pricing. We count every little fitting, how much solder per joint, delivery fees, labor, taxes, taxes on the taxes and all the other items involved with the cost of production. We shop among suppliers to save 1% here, 2% there so we can get the lowest possible cost for our materials. In general, we keep a keen eye on the direct cost for performing an installation. That's a good thing.

Overhead, on the other hand, is a real bug-a-boo. It must be accounted for in our pricing but knowing that cost per job is a bit more difficult. It's easy to lose track of paper clips, advertising, vehicle maintenance, coffee and all the other essentials that go into operating a business.

Fortunately, we can look in our check books to see what we've spent for these items so we can at least divide the cost among all the work we do. In simplest terms, if we spend $50,000 on overhead and sell 1,000 hours worth of work, then each hour must include $50 just to cover overhead costs. (Use the charge out calculator to get a reasonable idea of your overhead cost).