Value-based pricing makes you think about your business from the customer's perspective. You'll need to know this no matter which pricing method you use. Once you've identified costs, you can determine your break-even point. This is the point at which you neither make nor lose money in producing a product or delivering a service. To begin your break-even analysis, add up all fixed costs and determine what your variable costs are at different production volumes.
Variable costs are expenses that do vary with the amount of service provided or goods produced.
They include costs such as hourly pay for a contractor on a specific project, raw materials, etc. Some variable costs don't depend specifically on the number of products produced but are still variable, such as advertising or promotion expenses. Next, substitute your figures into the following break-even formulas. If it doesn't have enough business at these rates, it loses money by being in business. In our example, the number of hours required just to cover costs is 2,000.