Fees and Pricing
(Research and Setting)
Virtual Business
Business Management & Administration
1
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2
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Lesson Objectives
3
Performance Objective
The student will be able to research pricing and
billing practices of a virtual business office and then
use this information to help him/her successfully
complete specific tasks.
Specific Objective
The student is expected to research and set pricing
and billing practices for a virtual business office.
Copyright © Texas Education Agency, 2013. All rights reserved.
Need to Know Terms
4
 Billing
 Pricing
 In-House Billing
 Direct Costs
 Outsourced Billing
 Indirect Costs
 Invoice
 Labor
 Purchase Order
 Operating Costs
 Billing Practices
 Profit
 Fee
 Discount/Markdown
 Late Fee
 Inflation
 Billing Cycle
 Odd Number
 Payment Due Date
 Volume Pricing
 Outstanding Accounts
 Unit
 PayPal ™
 Retail Price
 Bank Card
 Wholesale Price
 Credit Card
 Variable Expense
 Market Exchange
 Fixed Expense
 Product Life Cycle
Copyright © Texas Education Agency, 2013. All rights reserved.
Introduction
5
• Did you know that all companies have
a pricing strategy?
• Did you know that all companies have
a billing strategy?
• Can you think of any examples of a
company’s pricing strategy?
• If you were selling a product or
service, do you know what you would
charge for it?
• If you were selling a product or
service, what different forms of
payment would you accept? What
would you definitely not accept?
Copyright © Texas Education Agency, 2013. All rights reserved.
Discovery Activity
6
Wal-Mart
 Products or Services?
 What is an example of its current online pricing strategy?
 What is an example of its current online billing practice?
 Do you think the company has had to change its pricing and billing
strategies since it first began?
 If anything, what factors do you think have affected its billing and
pricing strategies over the years?
Copyright © Texas Education Agency, 2013. All rights reserved.
Pricing Strategies Information
7
Good or
Service at a
particular
price that
customers
are willing to
buy
Good or
Service at a
particular
price that
businesses
(sellers) are
willing to sell
Copyright © Texas Education Agency, 2013. All rights reserved.
Market
Exchange
Pricing Strategies Information, Cont’d.
8
Simple pricing strategy technique - doubling your cost
Example of a Simple Strategy
Product=T-Shirt
Cost to Make=$10
Weekly Operating Expenses=$50
Weekly Projected Sales=8 T-Shirts
Weekly Target Profit Forecast=$30
Total Sales Revenue=$160
Price Per Unit=$20
(10x8)+50+30=160
160/8=20
Copyright © Texas Education Agency, 2013. All rights reserved.
Pricing Strategies - Practice
9
Cost to
Make
Weekly
Operating
Expenses
Weekly
Projected
Sales
Weekly
Target
Profit
T-Shirt
$12
$50
8
$30
Electronics
$80
$1000
100
$500
Ladder
$15
$500
20
$100
Total Sales
Revenue
Price Per
Unit
(Cost to Make x Weekly Projected Sales) + Weekly Operating Expenses + Weekly Target Profit = Total Sales Revenue
Total Sales Revenue/ Cost to Make=Price Per Unit
Copyright © Texas Education Agency, 2013. All rights reserved.
Pricing Strategies - Assignment
10
Use the provided worksheet to
determine the prices per unit for
5 items.
Use the simple method we did in
the guided practice.
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Billing Practices Information
11
Questions to ask when setting up billing practices:
 Will
you only do direct sales or will you allow wholesalers to
purchase your items and sell at retail prices?
 Will
you require immediate payment with either a major
credit card, bank card, or other form of online payment?
 If
you require immediate payment, which forms of
immediate payment will you allow?
 Will
you allow for billing (not immediate payment ; the
burden is on the seller to notify the buyer, at a later date,
how much the company owes)?
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Billing Practices Information, Cont’d
12
 If
you use billing, will it be in-house (you take care of all of your
outstanding accounts) or outsourced (you hire a billing company
to take care of your outstanding accounts)?
 Will
you accept POs (purchase orders)?
 Will
you charge late fees on any outstanding accounts?
 What
 Will
will be your billing cycle?
you allow customers to set their payment due date?
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Billing Practices - Assignment
13
You have created the ‘next big thing’ and people are wanting to buy
it. You decide to set up a website (virtual business) to sell this item to
your customers.
Answer the following questions and explain your reasoning.
1. you?
1. Will you sell to wholesalers or only do direct sales?
2. Pretend you require immediate payment. What forms of
payment will you accept?
3. Pretend you allow billing. Will you do the billing yourself (inhouse) or hire a billing company (outsourced)?
4. Pretend you allow billing. When do you expect to be paid (within
30 days, within 60 days, within 90 days)?
5. Pretend you allow billing. What happens if someone doesn’t pay?
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Review and Evaluation
14
Performance Objectives
 Did you learn about pricing and billing practices of a virtual
business office?
 Did you then use this information to help a business owner
successfully complete specific tasks?
Specific Objectives
 Did you do some research to learn about billing and pricing
strategies/practices?
 Were you able to determine pricing on products using the
simple method learned in the lesson?
 Were you able to determine how you would handle billing
practices, if given the opportunity?
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Extensions
15
 Create a list of 10 items for your new business.
Using the simple method we used in this lesson,
determine a price per unit for each item. All
information needs to be included: Cost to Make,
Weekly Operating Expenses, Weekly Projected
Sales, Weekly Target Profit, Total Sales Revenue,
and Price Per Unit.
 Type up a billing procedures information
document for your customers.
Copyright © Texas Education Agency, 2013. All rights reserved.