Learn about various types of costs involved in a business and how they are classified.

Cost :
Revenue :
Pricing :

Cost can be broadly divided into :
1.Startup Cost : Cost that an enterprise incurs before starting a business.

2.Fixed Cost : Expenses incured regularly irrespective of production or sales.
3.Variable Cost : Depends upon number of units sold and consumed.

For an entrepreneur it always good to have variable cost rather than fixed cost or startup cost.
Because better to have costs that can be avoided if neccessary.

All costs associated with the business.

What are major costs for a business.
Is your business value driven or cost driven

VIDEO : Revenue and Pricing

Businesses genrate income from sales this is called revenue
Each source of revenue is called revenue stream.
Revenue streams should be clearly defined.
Revenue should work otherwise change
Apply permutations of Revenue Model.
VIDEO : Pricing
Fixing Right PRice is key to making Profit
Right Price should bring you both customer and profit.

Profit = (Revenue - fixed + variable costs)

How to Fix Price ?
1.Understand Customer Segment.
2.Pricing Strategy

Three types of Pricing Strategy :
1.Maximization : A process by which a company determines the PRICE and PRODUCT output level that genrates the most PROFIT.

2.Market Penetration :
3.Market Skimming :

Pricing, you looked at the science behind pricing and learned about the following three strategies:

1.· Maximization – It is the process by which a company determines the price and product output level that generates the most profit. This works great when all customer segments have a similar willingness to pay and when the optimal short-term and long-term prices are equal. Starbucks is a good example of maximization. Its highly popular coffees are priced at a premium to maximize profits per cup.

2.· Market Penetration – This strategy involves pricing the product at a low price to win dominant market share. The strategy is to price your product low to maximize broad adoption of the product. A startup called Slack Technologies uses this strategy. “Slack for teams”, is a single workspace for small to medium companies or teams. Slack’s pricing strategy has a free basic plan and a low-priced annual subscription for its premium product.

3.· Market Skimming – It is a profit-maximization strategy usually used for high tech and low-availability goods. In skimming, you start with a high price and gradually broaden the product offering to address more of the customer base at lower prices. Apple sells the latest iPhones at the highest prices and repackages older models at lower prices to address different customer segments.

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