Articles

Are Your Contract Training Operating Margins at 50%?

Fri, Nov 20,2015 @ 09:48 AM
by LERN |

HiRes-2.jpg1. Ideally the operating margin for contract training contracts should be 50 percent or higher. So, if you sell a contract for $5,000, your operating margin (income – direct costs) - should be $2,500.

2. When pricing a contract you take your production costs and divide by at the most 50 percent. So, $2,500 divided by 50 percent = $5,000. Now you have done your formula pricing.

3. Next you do market pricing by understanding the competition and what your clients are normally willing to pay. If your competition is at $10,000 and your clients can afford $10,000, then you want to charge less than the competition, but be closer to $10,000. On contracts you can make a lot of money, you should because there will always be contracts where you will not get a 50 percent operating margin.

4. While open enrollment needs to be sensitive to price breaks and ending prices with a 5 or 9, contract training is not as sensitive. But if you have a $10,000 price, most likely it is better to price at $9,500 than $10,000. And if you have a $13,000 price it is most likely better to price at $14,500.

5. Lastly when providing prices to a client, consider providing three prices – high-end, mid-range, and low-end. It is easier for a client to say no to one price than it is three prices.

-If you would like to talk more about contract training pricing, contact Tammy at info@lern.org.

 

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