Fees and Pricing (Research and Setting) Virtual Business Business Management & Administration Copyright © Texas Education Agency, All rights reserved. 1

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Lesson Objectives Copyright © Texas Education Agency, All rights reserved. 3 Performance Objective The student will be able to research pricing and billing practices of a virtual business office and then use this information to help him/her successfully complete specific tasks. Specific Objective The student is expected to research and set pricing and billing practices for a virtual business office.

Need to Know Terms Copyright © Texas Education Agency, All rights reserved. 4 Billing In-House Billing Outsourced Billing Invoice Purchase Order Billing Practices Fee Late Fee Billing Cycle Payment Due Date Outstanding Accounts PayPal ™ Bank Card Credit Card Market Exchange Pricing Direct Costs Indirect Costs Labor Operating Costs Profit Discount/Markdown Inflation Odd Number Volume Pricing Unit Retail Price Wholesale Price Variable Expense Fixed Expense Product Life Cycle

Introduction Did you know that all companies have a pricing strategy? Did you know that all companies have a billing strategy? Can you think of any examples of a company’s pricing strategy? If you were selling a product or service, do you know what you would charge for it? If you were selling a product or service, what different forms of payment would you accept? What would you definitely not accept? Copyright © Texas Education Agency, All rights reserved. 5

Discovery Activity Wal-Mart Products or Services? What is an example of its current online pricing strategy? What is an example of its current online billing practice? Do you think the company has had to change its pricing and billing strategies since it first began? If anything, what factors do you think have affected its billing and pricing strategies over the years? Copyright © Texas Education Agency, All rights reserved. 6

Pricing Strategies Information Good or Service at a particular price that customers are willing to buy Good or Service at a particular price that businesses (sellers) are willing to sell Market Exchange Copyright © Texas Education Agency, All rights reserved. 7

Pricing Strategies Information, Cont’d. Simple pricing strategy technique - doubling your cost Example of a Simple Strategy Product=T-Shirt Cost to Make=$10 Weekly Operating Expenses=$50 Weekly Projected Sales=8 T-Shirts Weekly Target Profit Forecast=$30 Total Sales Revenue=$160 Price Per Unit=$20 (10x8)+50+30= /8=20 Copyright © Texas Education Agency, All rights reserved. 8

Pricing Strategies - Practice Cost to Make Weekly Operating Expenses Weekly Projected Sales Weekly Target Profit Total Sales Revenue Price Per Unit T-Shirt $12$508$30 Electronics $80$ $500 Ladder $15$50020$100 (Cost to Make x Weekly Projected Sales) + Weekly Operating Expenses + Weekly Target Profit = Total Sales Revenue Total Sales Revenue/ Cost to Make=Price Per Unit Copyright © Texas Education Agency, All rights reserved. 9

Pricing Strategies - Assignment Use the provided worksheet to determine the prices per unit for 5 items. Use the simple method we did in the guided practice. Copyright © Texas Education Agency, All rights reserved. 10

Billing Practices Information Questions to ask when setting up billing practices:  Will you only do direct sales or will you allow wholesalers to purchase your items and sell at retail prices?  Will you require immediate payment with either a major credit card, bank card, or other form of online payment?  If you require immediate payment, which forms of immediate payment will you allow?  Will you allow for billing (not immediate payment ; the burden is on the seller to notify the buyer, at a later date, how much the company owes)? Copyright © Texas Education Agency, All rights reserved. 11

Billing Practices Information, Cont’d  If you use billing, will it be in-house (you take care of all of your outstanding accounts) or outsourced (you hire a billing company to take care of your outstanding accounts)? Will you accept POs (purchase orders)? Will you charge late fees on any outstanding accounts? What will be your billing cycle? Will you allow customers to set their payment due date? Copyright © Texas Education Agency, All rights reserved. 12

Billing Practices - Assignment You have created the ‘next big thing’ and people are wanting to buy it. You decide to set up a website (virtual business) to sell this item to your customers. Answer the following questions and explain your reasoning. 1.yo u? 1.Will you sell to wholesalers or only do direct sales? 2.Pretend you require immediate payment. What forms of payment will you accept? 3.Pretend you allow billing. Will you do the billing yourself (in- house) or hire a billing company (outsourced)? 4.Pretend you allow billing. When do you expect to be paid (within 30 days, within 60 days, within 90 days)? 5.Pretend you allow billing. What happens if someone doesn’t pay? Copyright © Texas Education Agency, All rights reserved. 13

Review and Evaluation Performance Objectives Did you learn about pricing and billing practices of a virtual business office? Did you then use this information to help a business owner successfully complete specific tasks? Specific Objectives Did you do some research to learn about billing and pricing strategies/practices? Were you able to determine pricing on products using the simple method learned in the lesson? Were you able to determine how you would handle billing practices, if given the opportunity? Copyright © Texas Education Agency, All rights reserved. 14

Extensions Create a list of 10 items for your new business. Using the simple method we used in this lesson, determine a price per unit for each item. All information needs to be included: Cost to Make, Weekly Operating Expenses, Weekly Projected Sales, Weekly Target Profit, Total Sales Revenue, and Price Per Unit. Type up a billing procedures information document for your customers. Copyright © Texas Education Agency, All rights reserved. 15