Ensure Profitability on a Big Deal Do you need to calculate your price and potential profitability for a single account? For example, you may be negotiating a deal for a unique service, a complex combination of customized products, or just trying to figure out how low you can price a service you already offer.
Summary EXERCISE SUMMARY
When to Address
Who Should Participate
Where to Use the Results
If you’re working a big deal and negotiating price with your prospect Business leaders: company founders, owners, presidents and vice presidents Marketing and sales leaders Product managers Channel managers Use them as a benchmark for future deals of this type.
Why it’s Important
Sometimes, big customers have a lot of negotiating leverage and can whittle away your margins. It’s a good idea to know your break-‐even point prior to entering negotiations.
What Builds Upon it
Your pricing should still reflect your value proposition.
Timeframe to Completion Potential Business Impact
Roughly 30 minutes to one hour.
Medium
Pricing Ensure Profitability on a Big Deal
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Deliverable
You’ll estimate your cost of goods and calculate your lowest price to offer.
Next Steps
Determine your price sensitivity.
Target Completion Date
PARTICIPANTS TASKS
PERSON RESPONSIBLE
DUE DATE
Notes
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Ensure Profitability on a Big Deal
What to Complete
1. CALCULATE PROFITABILITY ON A SINGLE DEAL
Where it Fits in Pricing Match Pricing Strategy to Value Proposition Define Pricing Strategy Determine Cost of Goods Sold Set Price Floor Review Competitors’ Prices Determine Price Analyze Competitor Price Changes Determine Competitor Price Change Response Gather Price Sensitivity Data Determine Price Elasticity Find Optimal Price Calculate Profitability on a Single Deal
1. CALCULATE PROFITABILITY ON A SINGLE DEAL Do you know (or have a reasonable estimate of) the Cost of Goods for the product or service? Yes: Use 66-‐K to calculate your price No: Use 66-‐L instead
As always, we recommend talking with your finance team about any COGS estimate – companies can calculate this figure differently. Once you’ve completed the worksheet, what price (or range) do you recommend? Deal name
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Recommended price/range Total profit expected at this price Gross margin % at this price
Comments Use 66-‐K as your report.
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