Prepare a Price List

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Yellow Belt
Virtually all business engaged in selling require some form of price list.

A little known fact is that under the Sale of Goods Act 1979, the price you give is only an offer to treat - you can't be forced to sell at that price. But, if you aren't prepared to sell at the price on the list then you risk damaging the reputation of your business, losing customers, and having negative comments said about you. Generally it makes more sense for you to take a smaller profit, or even a loss, if it keeps your customers happy.

Prices will change, so it's a good idea to date your price lists - particularly if your customer is likely to keep it for a long time. If you have some special offers then make it clear when they expire. With some businesses it can also be useful to include a clause at the end of the price list stating that prices are subject to change.

The normal rule is that if your business sells to consumers, you should list all prices inclusive of VAT. If you sell to other businesses, it is common practice to give prices excluding VAT. However, you should clearly state that this is what you've done. There are additional rules you'll need to follow too involving such things as showing your VAT number if you are selling to other businesses.

If you charge extra for delivery, or postage costs always make it clear what these charges are.

Sage PriceFlex is an example of a good software package to help you draw up complex price lists if necessary. If you only sell a limited number of products you may want to do it all with a calculator.

Quotation or estimate?

It isn't always possible for certain businesses to give standard prices for goods and services. The building trade, or electrical appliance repairs are examples of this. The time and materials required for each job vary depending on different customers' needs.

This is where you have to give a quotation or an estimate instead.

You should be very careful over not getting the two confused. A quotation is a fixed price offer and once accepted by the customer you can't increase it, even if you have to carry out much more work than you originally anticipated. But, if your customer asks you to do some work outside of your quotation you can of course charge separately for that.

If it's likely that there will be additional costs you can't factor in when trying to price a job up, it would be much better for you to give an estimate.

An estimate is an educated guess at what a job may cost - but it isn't binding. You could also provide an estimate based on the cost if things didn't go as planned, ie unforeseen problems. That way your customer won't get a nasty shock when you present him with his bill. It's always advisable anyway to let your customer know how the job's going, and whether everything is going according to plan.

To work out a quote or estimate you need to know your fixed and variable costs. These include the cost-per-hour of manual labour and the cost of the materials you'll require. Your quote or estimate is then calculated according to what you think the job will involve.

Always give your quotes and estimates in writing and include a detailed breakdown. This will help to avoid any disputes about what work is included in your overall price.

To protect yourself it is a good idea to write how long your quote or estimate is valid for. Your quote or estimate will no longer be valid after this time.
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