Www.caplus.org.uk Costing for funding applications and contracts – how much? Bedford 28 th June, 2011 John O’Brien Community Accounting Plus.

www.caplus.org.ukwww.caplus.org.uk

Costing for funding applications Costing for funding applications and contracts – how much?and contracts – how much?

BedfordBedford2828thth June, 2011 June, 2011

John O’BrienJohn O’Brien

Community Accounting PlusCommunity Accounting Plus


Costs or priceCosts or price

In the old ‘voluntary sector’ we work out In the old ‘voluntary sector’ we work out the costs and ask people to cover them.the costs and ask people to cover them.

In the ‘commercial sector’ we set a price In the ‘commercial sector’ we set a price and drive down costs to make profits.and drive down costs to make profits.

In the new voluntary sector commissioning In the new voluntary sector commissioning world, we need to set a price that covers world, we need to set a price that covers our costs.our costs.


Setting the priceSetting the price

The price decision is complex – this The price decision is complex – this session is about making sure you get it session is about making sure you get it right and you cover your costsright and you cover your costs

3 types of pasta3 types of pasta

Price confusion – gas bills, special offers, Price confusion – gas bills, special offers, 10% free.10% free.


Is it just a game…Is it just a game…

The American wine marketThe American wine market

Supermarket milkSupermarket milk

Website designersWebsite designers

Buying a kettleBuying a kettle

Price is related to cost, but not exclusively.Price is related to cost, but not exclusively.


It’s not a battleIt’s not a battle

It is NOT about getting more money out of It is NOT about getting more money out of the funders or clients. It’s about the right the funders or clients. It’s about the right amount of money.amount of money.

No one wins if the group is not financing No one wins if the group is not financing its activities properly.its activities properly.

Remember that the group need to recover Remember that the group need to recover the full costs, but not necessarily from the the full costs, but not necessarily from the same source.same source.


What am I worth?What am I worth?

How much CA Plus should charge for one How much CA Plus should charge for one day of my time for consultancy work?day of my time for consultancy work?

How does CA Plus reach a decision?How does CA Plus reach a decision?


Two questions to start off…Two questions to start off…

1.1. How much does it cost your organisation How much does it cost your organisation (per hour) for you to be here today? (per hour) for you to be here today?

2.2. Who is paying for you to be here now?Who is paying for you to be here now?


The productThe product

Different packagesDifferent packages

Introductory offer – one hour free.Introductory offer – one hour free.

Loyalty – multiple services – buy one get Loyalty – multiple services – buy one get one free?one free?

The competitionThe competition

MarketingMarketing

So, what about the costs…….So, what about the costs…….

An example - The CA PlusAn example - The CA Plus Time bank Time bank


Know your costsKnow your costs

‘‘Direct’ costs are easy. These relate to the Direct’ costs are easy. These relate to the activity you are considering. If you were activity you are considering. If you were not engaged in this activity, they would be not engaged in this activity, they would be NILNIL

Support costs are more tricky. Sometimes Support costs are more tricky. Sometimes called ‘overheads’ or ‘core costs’ or called ‘overheads’ or ‘core costs’ or ‘indirect costs’. They relate to all your ‘indirect costs’. They relate to all your activities.activities.


Examples of Support Costs in Examples of Support Costs in CA PlusCA Plus

Staff supervision, training, subscriptionsStaff supervision, training, subscriptions

Senior staff reviewing the files, their own Senior staff reviewing the files, their own training, supervision, etctraining, supervision, etc

The equipment used such as IT, phones etc The equipment used such as IT, phones etc (what about depreciation?)(what about depreciation?)

Committee meetingsCommittee meetings

The heatingThe heating

The audit feeThe audit fee

The redecoration of the office every 5 yearsThe redecoration of the office every 5 years


Marginal and Average costsMarginal and Average costs

This is crucial and at the heart of this issueThis is crucial and at the heart of this issue

Marginal cost is the cost of doing one Marginal cost is the cost of doing one more thingmore thing

Average cost is the cost of doing each Average cost is the cost of doing each thing.thing.

An example …..An example …..

www.caplus.org.uk

Today

Project A B C Total

Costs

direct 10 10 10 30

shared 4 4 4 12

14 14 14 42

Grants 14 14 14 42

Net result 0 0 0 0

www.caplus.org.uk

A new projectProject A B C D Total

Costs

direct 10 10 10 10 40

shared 4 4 4 12

14 14 14 10 52

Grants 14 14 14 10 52

Net result 0 0 0 0 0

www.caplus.org.uk

Project B comes to an endProject A B C D Total

Costs

direct 10 0 10 10 30

shared 4 0 4 4 12

14 0 14 14 42

Grants 14 0 14 10 38

Net result 0 0 0 (4) (4)


What should you have charged What should you have charged funder D?funder D?

Funder D has only paid for ‘marginal’ costFunder D has only paid for ‘marginal’ costTotal support costs were £12 before project D. Total support costs were £12 before project D. They didn’t go up.They didn’t go up.The ‘average’ cost of project D could, and The ‘average’ cost of project D could, and should, have included an amount for support should, have included an amount for support costs.costs.At £4, with project D, the group wins. When B At £4, with project D, the group wins. When B closes, the group survives.closes, the group survives.At £3, with project D, the group wins, but when B At £3, with project D, the group wins, but when B closes, the group still dies.closes, the group still dies.


What can you do now you know the What can you do now you know the full cost?full cost?

If you know how much time you spend on If you know how much time you spend on each activity you can see the cost per houreach activity you can see the cost per hour

You can move on to ask how you finance You can move on to ask how you finance this activity…by grants, contracts, fees, this activity…by grants, contracts, fees, fundraising etc fundraising etc

If you charge fees for some services, you If you charge fees for some services, you can see the minimum you should charge can see the minimum you should charge to break even.to break even.


Some theory perhaps…Some theory perhaps…


Know your market - clientsKnow your market - clients

Ability to payAbility to pay

Different prices for different clientsDifferent prices for different clients

Price clarity or price confusion – who Price clarity or price confusion – who understands their gas bill?understands their gas bill?

Client inertiaClient inertia


Know your market - competitionKnow your market - competition

Is there any competitionIs there any competition

Local, regional, nationalLocal, regional, national

Talk to them, beat them, copy them, Talk to them, beat them, copy them,

Find a unique selling point – quality?Find a unique selling point – quality?


Know your market - strategyKnow your market - strategy

Discounts to get people on boardDiscounts to get people on board

Loss leadersLoss leaders

Cross subsidy Cross subsidy

Is the aim to cover costs or make profit?Is the aim to cover costs or make profit?


Some tools to helpSome tools to help

These excel spreadsheet templates are These excel spreadsheet templates are available free from caplus…..available free from caplus…..

email me directly:email me directly:

jo’[email protected]’[email protected]


Don’t forgetDon’t forget

What make our sector unique is that it is What make our sector unique is that it is that the goal is to achieve our objectives.that the goal is to achieve our objectives.

Yes we need to cover our costs – all our Yes we need to cover our costs – all our costs – but we don’t do things just costs – but we don’t do things just because they are profitablebecause they are profitable

So don’t sell your soul.So don’t sell your soul.


And finallyAnd finally

If in doubt, call it £45 an hourIf in doubt, call it £45 an hour

Www.caplus.org.uk Costing for funding applications and contracts – how much? Bedford 28 th June, 2011 John O’Brien Community Accounting Plus.

Documents

costsdirect costs

core costs

indirect costs

nilsupport costs

ukexamples of support

issuemarginal cost

thingaverage cost

average cost of project