Every single company that wants to be profitable faces the big question. How should I price my product or service, so that it will sell, but also will cover all my costs? Not to mention it will provide me with a reasonable margin that I can use to develop new products, lower the costs of current ones, gain new competence or just buy yachts and helicopters.
The easiest way of coming up with the price tag is to check your competition. This, however, has a few flaws. First of all, you should be looking at competition doing something similar enough. Second of all, you need to have an advantage, so that clients choose you — it might be the lower price, but will that lower price cover all your needs?
Below you fill find two approaches I worked out together with Tomasz Łuczak. In the first one, let’s call it naïve, I have divided the indirect costs equally between projects by the number of developers working on them. In the second method based on Activity-Based Costs (ABC), I have tried to first better understand what are the cost drivers for various costs, and then better divide them. Some of the results are quite interesting.