Session 5: Budgeting and Finance
​ICEBREAKER! 2 Truths And A Lie: Students need to guess the lie and will earn a point for each correct answer. |
Pricing Your Product/Service
ACTIVITY: Real World Examples
Can someone read this?
1. Craft Fair: Imagine you make handmade bracelets. If each bracelet costs $2 in materials and takes 30 minutes of your time, how much should you charge to ensure you make a profit while remaining competitive with other sellers?
2. Lemonade Stand: If you use premium organic lemons and fancy cups, you might charge more than a stand using regular lemons and paper cups.
Basics of Business Finance and Costs
ACTIVITY: Price and Earned Profits
Someone read through this!
Key Concepts:
Income (or Revenue): Money earned from selling a product or service.
Expenses: Costs incurred to run the business.
Profit: The money left after subtracting expenses from income. It's your reward for running the business.
Loss: When expenses exceed income, leading to negative profit.
ACTIVITY: Google Search FOR PROFITS!
Do a Google search for a product or service like YOURS and find out how much other people are charging! Your price should be close to your competitors. Decide on a price.
How much will you charge for your product per customer? $_______ OR
How much will you charge for your service per customer? $______
After a customer pays you…..THIS IS YOUR INCOME/REVENUE
Do you have expenses?
How much did the product cost YOU? $_____ OR
What is the cost of supplies do you need to provide your service? $_____
These are your expenses
INCOME Minus EXPENSES = PROFIT
How much profit (per sale) will you make? $_____
VIDEO TRANSCRIPTIONS
BUDGETING AND FINANCE:
We're going to dive into a topic that's a bit like setting the right price for your lemonade stand – it's all about pricing your product or service in a way that makes sense for your business. Just like you wouldn't want to charge too much for a cup of lemonade, you also wouldn't want to charge too little and not cover your costs. Let's explore how to find that sweet spot for pricing!
Understanding Costs: First things first, you need to know how much it costs to make or provide your product or service. This includes things like materials, production, and any other expenses. Once you know your costs, you can make sure your price covers these expenses.
Research the Market: Look around and see what others are charging for similar products or services. This is like checking out the prices of other lemonade stands in the neighborhood. It helps you understand what people are willing to pay.
Consider Value: Think about the value your product or service brings to your customers. If your lemonade is really refreshing on a hot day, people might be willing to pay a bit more. Similarly, if your product solves a problem or fulfills a need, it can justify a higher price.
Competitor Analysis: Look at what your competitors are offering. If your lemonade stand has unique flavors or extra toppings, it might be okay to charge a bit more than the regular lemonade stand. Or if you are providing a service (like dog sitting), what do other people charge?
Profit Margin: Decide how much profit you want to make. Just like saving money from your lemonade sales, businesses need to make some profit to grow and succeed.
Test and Adjust: Don't be afraid to try different prices and see how customers respond. Just like changing your lemonade recipe to make it better, adjusting your price based on feedback can make a big difference.
Consider Discounts and Promotions: Think about offering discounts for bulk purchases or special promotions. This can attract more customers and boost sales, just like having a "buy one, get one free" deal for your lemonade.
Stay Competitive: Keep an eye on what's happening in the market. If prices change or new competitors show up, you might need to adjust your pricing strategy.
Pricing is like finding the perfect balance between what your product or service is worth and what your customers are willing to pay. Setting the right price can make your business successful and satisfying for both you and your customers!
Basics of Business Finance and Costs
Let's learn the basics of business finance and costs by looking at two types of businesses: service and product. Imagine you run a pet-sitting service and a snack stand. Both businesses need to be smart with their money.
Service Business Costs (Pet Sitting): In a service business like pet sitting, costs are what you spend to provide your service. For example, you spend on pet supplies, advertising, and transportation. Other service businesses may have costs like equipment and employee wages.
Fixed Costs: These costs stay the same, like rent for your pet sitting space. Variable Costs: These change based on how much work you do. For pet sitting, more pets mean more treats and supplies.
Product Business Costs (Lemonade or Snack Stand): In a product business like a lemonade stand, costs are what you spend to make your product. You buy lemons, sugar, cups, and signs. Other product businesses might spend on ingredients, packaging, and shipping.
Fixed Costs: These don't change, like the cost of a lemonade stand permit. Variable Costs: These change with production. Making more lemonade means buying more lemons and sugar.
Why It Matters: Understanding costs is crucial for both types of businesses. It helps you set the right prices for your service or product. If you're spending a lot on supplies or ingredients, you might need to charge more. Charging too little won't cover your costs."
Making a Profit:
Profit is what's left after you subtract your costs from the money you make. Just like you want money left over after expenses, both service and product businesses aim to make a profit.
Whether you're offering a service like pet sitting or selling a product like lemonade, managing your money and understanding costs is key to running a successful business. So, remember these basics of business finance as you explore different business ideas!