Margin pricing is a pricing strategy used by businesses to determine the selling price of a product or service based on the desired profit margin. In this approach, the company sets the selling price by adding a predetermined profit margin to the cost of producing or acquiring the product.
In Sera, companies can set their profit margins in their pricebook. The system will apply a formula to determine the final cost for customers. Sera uses the department labor cost (how much an hour's worth of labor costs the business) multiplied by the time a task takes, plus the price of parts and fees, and applies a margin on the COGS (cost of goods sold) to create task pricing.
How the margin pricing formula works:
Selling Price = Total COGS / (1 - Desired Profit Margin Percent)
In this formula:
- Selling Price: The final price at which the product or service will be offered to customers.
- COGS: The total cost incurred by the business to provide this service. This includes the labor cost, time allotted, parts cost, and financing fees, if applicable.
- Desired Profit Margin: The percentage of profit the company wants to make on each sale. It is expressed as a percentage
For example, if a company's cost price for a capacitor is $133.91 and they want a 55% profit margin, the selling price would be:
Selling Price = $133.91 / (1 - 0.55) = $133.91 / 0.45 = $298.00
To change the margin of the whole pricebook in Sera, navigate to your pricebook. Click on the edit pencil of the price sheet you want to edit, and change the margin. We recommend setting your margin to 55% at first and then tweaking your margin up or down by a few percent to calculate appropriate costs for your services.
After selecting save, the margin will apply itself in the background.
Changing Margin of Individual Tasks
The margin of individual tasks can be changed as well. Click on the price you'd like to edit.
After selecting the price, a margin window will appear. A user can see the current margin applied, or change the margin to a specific margin target. The window will display the new price once a change has been made. Feel free to change the margin multiple times to see how it affects the final price! If a user wanted to override the margin and use a manual price, they can enter that information in the window. The manual price will auto-adjust and show the new margin on the tasks. Once your final price is where it needs to be, select save.
Changing the margin price of a specific task either by setting a margin target or setting a manual price makes that new margin "sticky." Changing the margin target of the pricebook will not change this individual margin.
Changing Margin of Categories
Sometimes, companies need to change the margin of a whole category, i.e. every install task needs to be at a 40% margin. To change the margin of a category, the pricebook needs to be downloaded as an editable Excel file, edited, and then re-uploaded.
To download the pricebook as an editable Excel file, navigate to the pricebook, select the edit pencil of the pricebook you need to download, and select download.
If using a member and nonmember pricebook, only edit the member price! Nonmember price books reference member price books, which means only the member pricebook needs to be edited in this way.
After the file is downloaded, open the Excel Document. Use the Filter arrow next to Column D to change the category you are viewing.
The Excel document is locked in certain places! Only the gray columns can be changed.
Once you are viewing the correct category, change the margin in Column M. After every change has been made, save the document and re-upload it the same way it was downloaded. Your margin changes will be applied to the pricebook.