Pricing

How much should we charge?

Break even analysis can also be used to determine the price we need to charge. There are three main methods for setting prices:

• Cost Based Pricing - setting price relative to the cost to produce the item
• Competitor Based Pricing - setting price relative to other competitors in the market
• Market Based Pricing - setting price based on what people are willing to pay

When launching a new product and calculating our break even, we have to make projections about how much we will sell at different price points. If we are confident in the number we expect to sell, we can identify the minimum price to charge and still break even.