business processes slide 1 introduction to business processes for web developers rhys parry
TRANSCRIPT
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Business Processes Slide 1
Introduction to Business Introduction to Business Processes for Web DevelopersProcesses for Web Developers
Rhys Parry
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Business Processes Slide 2
Costs and PricingCosts and Pricing
What is the difference?– Costs
• What it costs YOU to deliver a product or service
– Price• Is what your CUSTOMER pays
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Business Processes Slide 3
CostsCosts
Purchase costs– Raw materials– Equipment Costs
Costs of Finance– Interest Payable or Lost
Direct Labour Costs– Salaries– Pensions
Overhead Costs– Premises, Admin, Sales & Marketing– Not attributable to projects
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Business Processes Slide 4
Costs of Running a CarCosts of Running a Car
Cost £10,000Run for 3 yearsSell for £4,20010,000 miles per year
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Business Processes Slide 5
Cost of Running a Car …..Cost of Running a Car …..
Fixed Costs:
Depreciation 5800
Loss of Interest 927
Car Tax 475
Insurance 1500
Total Fixed Costs
8692 28.97p/mile
Variable Costs:
Petrol 3300
Servicing 300
Total Fixed 3600
TOTAL COST 11292 48.97p/mile
No Inflation
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Business Processes Slide 6
Costs……Costs……
Fixed– Premises– Administration– Sales & Marketing– Costs of Finance
Variable– Raw Materials– Direct Labour Costs
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Business Processes Slide 7
Fixed & Variable CostsFixed & Variable Costs
Production Units Can Have Fixed Costs– Independent of Sales– Magazine Publishing– Toy Manufactures– Software Development
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Business Processes Slide 8
DepreciationDepreciation
Need to know value of Equipment and StockToo costly to revalue every ItemSimplified:– Straight Line– Reducing Balance
Must be Consistent and Used & Declared in Annual Accounts
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Business Processes Slide 9
Straight Line DepreciationStraight Line Depreciation
Year Depreciation End Year Value
1 2000 8000
2 2000 6000
3 2000 4000
4 2000 2000
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Business Processes Slide 10
Reducing Balance DepreciationReducing Balance Depreciation
Year Depreciation End Year Value
1 3000 7000
2 2100 4900
3 1470 3430
4 1029 2401
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Business Processes Slide 11
Reducing Balance……..Reducing Balance……..
Need to Identify Classes of EquipmentComputers – High depreciation rateBuildings - Low rateCars – Medium rateFurniture – Low rate
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Business Processes Slide 12
Labour CostsLabour Costs
Salary plus on costs:– National Insurance– Pensions
Persons Day rate– Statutory & Ordinary Holidays– Sickness– Training– Idle time– Unchargeable Time
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Business Processes Slide 13
Staff CostsStaff Costs
Total Work Days 260Junior Staff – 220 Chargeable daysSenior Staff - 160 Chargeable days
Junior on £20,000– Cost £24,000 (No overheads)– Overheads £24,400– Cost per day = £220 per day
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Business Processes Slide 14
Overhead CostsOverhead Costs
Not Attributable to Particular project– Building Costs– Administration
• Personnel• Finance• Sales & Marketing• Support
Fixed Costs and are very Real!!Computer Industry– 100% Small Company– 200 – 250% Large Company
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Business Processes Slide 15
PricingPricing
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Business Processes Slide 16
Pricing in the Computer IndustryPricing in the Computer Industry
Cost Plus ServicesFixed priceProducts
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Business Processes Slide 17
Cost PlusCost Plus
Agree with Client your Costs per day– Usually on Direct Labour– Overhead
Agree Profit margin“Body shopping”Unsuitable today for projects
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Business Processes Slide 18
Fixed priceFixed price
Total of:– Direct Labour– Bought in Items– Indirects
Profit addedUsed in Competitive TenderingRisks versus Profit
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Business Processes Slide 19
Software Product PricingSoftware Product Pricing
Marginal Costs Very Low– Manual, Box and CD Rom < £10.00
Large Development Costs
Sales proportional to marketing
Sales fall with increasing price
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Business Processes Slide 20
Customer ExpectationsCustomer Expectations
Price Nature (Low to High)
Free Shareware etc. Some great products (Winzip)
£20 Buyer’s Risk – Internet Sales
£100 -£500 High volume - Real Software – Microsoft, Macromedia, Adobe
£10,000 Real product – low volume – Bugs and Support
£100,000 On the drawing board!!
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Business Processes Slide 21
Support and other IssuesSupport and other Issues
Large percentage of income– 10% - 25% of turnover– Sage, Microsoft
Support & UpdatesMust be Real and Valuable
Annual Licence fee chargesPer use ChargesApplication Service Providers