Pricing for export
Before you start exporting , you need to decide on a selling price for your products. This is where a cost price calculation helps. Read more about calculating a cost price.
Why calculate the price?
You agree with your customers in advance on the selling price of your product. To do so, you need to know your costs. If you calculate the cost price of your product first, you can agree on a selling price that covers all your costs. And with which you can make a profit.
How do you calculate the cost price?
To calculate a cost price, you take into account the product’s production price and the export costs. There are direct and indirect costs.
Direct costs
Direct costs are costs made to produce the product, such as:
- buying raw materials
- production costs
- depreciation of machinery
- transport costs
When exporting there are sometimes extra costs. For example for:
- export documents for shipments
- translations
- local tests
Indirect costs
Indirect costs include the fixed operating costs of your business. Such as:
- advertising budget
- travel costs
When calculating a cost price for your export product, you include all these cost .
An example for calculating the cost price
Let us say you want to export 500 handbags to Australia. For how much will you sell these bags? In this example of a cost price calculation, you will see what direct and indirect costs you will have to deal with. And what a good selling price is to make a profit.
Direct cost price calculation
| Production and procurement costs: € 20 per handbag | € 10.000 |
| Cost of a fully loaded container | € 250,00 |
| Transport costs | € 2.750 |
| Sale value of shipment | € 13.000 |
| Direct cost per handbag: €13,000 ÷ 500 | € 26,00 |
| Retail price per handbag | € 49,95 |
| Profit per handbag | € 23,95 |
| Total gross profit (500 handbags, € 23.95 each) | € 11.975 |
Fixed operating expenses
The direct cost price example does not yet include fixed operating expenses. Such as:
- storage space rental
- car costs
- telephone costs
- business insurance
- gas, water and electricity
- your income
- interest on loans
VAT (turnover tax) is not included in the calculation.
Calculating the indirect costs
For example, your fixed operating expenses per year are €61,800. You think you will sell 3,000 handbags per year. You calculate the indirect costs per handbag by dividing the fixed expenses by the number of handbags: €61,800 ÷ 3,000 = €20.60 per handbag.
| Direct costs per handbag | € 26,00 |
| Indirect costs per handbag | € 20,60 |
| Total cost price per handbag (direct + indirect costs) | € 46,60 |
| Profit per handbag | € 23,95 |
| Retail price per hand bag (cost price + profit) | € 70,55 |
| Total profit (500 handbags, € 23.95 each) | € 11.975 |
The example shows how the selling price per handbag changes if you include not only direct costs but also indirect costs. This is called a full-cost calculation.
Determining the selling price
After calculating the cost price, you can determine the selling price. Look not only at the cost price, but also at the prices of other suppliers in the export market. Make sure your price fits this (market-based).