This exercise expands on the pro-forma profit and loss statement and includes a couple different methods of setting the price of frames or complete builds and seeing the impact this has on net income / owner’s pay.
Use this spreadsheet to play along. I couldn’t upload an excel file so here’s a link to a google sheet. You can make a copy or download the file to edit it.
In general, you can plug your numbers into cells shaded white. If you update a cell shaded grey make sure there isn’t a formula in it.
To get the most out of it, you need to have a solid understanding of your SG&A (fixed) costs and your bill of material (variable) costs. Part 1 discussing these items can be found here
The easy version is meant to be just that, quick and easy. The “middle” version adds in some more variables and allows you to set prices via markup percentages or just plug in numbers and see what happens. These exercises give you educated insights about price setting and cost management. Each one will give you different results. Use them to experiment and try different things
I designed them to be as universal as possible. The more you customize it for your unique situation, the better the information will be.
I added some notes to the various sections, if you have any questions feel free to ask here.
Part 3 will be the “Fully Loaded” version. It will include items like:
"I spent 54 hours designing a 3D printed dropout. I calculated that my hourly rate is $48.70. I also spent $287 in prototypes. This means my development costs total $2916.80. I plan on spreading this cost over my next 30 frames that use this dropout. That means i’ll add $97.23 to the cost of each frame in addition to the actual cost of each dropout. After markup this means the customer will pay $194 …and so on.
If i’m feeling motivated i’ll also discuss time studies and analyzing the cost associated with each aspect of the business. What is the cost of adding custom engraving to the dropouts and how does it effect margin? What is the actual cost of the design time for custom frames vs stock frames?
Enjoy.