I was in a debate recently with someone on how we should go about pricing out our material costs to clients and we couldn't decide on what is the proper way in going about doing this.
If a sheet of material, 4' x 8', costs us $100.00 what should we sell it for? If we offer that material cut down to as low as 1' x 1' how should we go about pricing it? Does it make a difference that we are starting and should we markup annually if we offer the material at a discounted rate?
From my understanding and what I have scene material cost should always be times by three:
I know hourly rate plays a different part but at this time we have no overhead and I am running the company out of my home in the basement for a couple of years till business is steady and I can do it full time.
Price per unit on its own is meaningless - what about all your running costs?
You can't even begin to calculate your cost and sale price without factoring in all your static costs including staff costs - if marking something up by 2.5 and selling 100 a week means you don't break even overall regardless of how much you made on each unit relative to its purchase price then you either need to sell more, lower your costs or increase your price.