When plotting a course from any point in your life to retirement, there needs to be a plan. If you have no plan, how do you know if you are on track to reach whatever goals you wish to have? A plan lets you know if you are able to reach your goals, how close you are, and if you need to make any necessary changes, To create a plan, there are 3 major steps to include. Establish where you are today, what your goals are when you retire, and the path to get from today to retirement.
Step 1: Today
To create the plan, you need to have a starting point. You need to understand your current situation and what you have. Your current status includes, your assets such as cash, savings, investments, possessions, and anything of value that does not fall into the previous list. You can divide them into those categories as they will be identified as having a different benefit to your financial plan. Next, you need to list your liabilities or debts. These include all loans, credit cards, and anything in which you owe to somebody else. It can include money, services, or anything of value.
The plan should then identify your assets that can be used to off set your short term liabilities, such as credit cards and other short term loans. This will allow you to reduce those types of debt that usually carry a higher interest rate. By eliminating loans and debt with high interest rates, you allow yourself to keep those loans that may benefit you to keep. These are usually low interest, long term debts that can allow you to pay them off slowly and use the money you spend on other debts to be put into to short and intermediate term savings, as well as retirement investments.
Step 2: Retirement Goals
After you identify where you are today, you need to understand where you want to go. When you plan a trip across the country, you have a destination in mind. If you live in Los Angeles, and you want to go to New York, then you have set your goal. But, a part of that goal is to select a desired date. If you want to get to New York in 7 days, you will use a different means than if you want to get there in 1 day. Just like that trip, you will need different products to reach your goals. Another point to know is what kind of lifestyle do you want when you retire. Do you want to live the same lifestyle as you do now? Do you want to travel more? Relax more? Take up a new hobby? There are many things to consider when you make your retirement goals.
Some things to keep in mind when you create your list of goals, is to understand that inflation and taxation will affect the value of the money you need in the year you retire. $1million today will not buy what it will in 20-30 years from now. If you can live fine on $8,000 a month, you may need more than that to live in 30 years. Conversely, you will not have the debts and payments that you have today either. If you play your cards correctly, you may not have a mortgage, student loans, and kids to feed and clothe. So taking into account the future value of money and the understanding of what you will probably not be paying in expenses, you can come up with a number that you can live on and enjoy your retirement. Remember, as you go along, you will be revising your goals so you can get a better fit as you get close to actual retirement.
Step 3: Getting from Here to There
Now that you know where you are and where you are going, you need to plot out how you are going to get there. This is where the hard work comes in. This is where you get a professional to help you create this plan. First, you will need to calculate your disposable income (DI). This is the dollar amount you have left over from your paycheck and all other forms of income and subtract all your expenses. By knowing your DI, you can then take the steps necessary to eliminate your bad debt and increase your savings and investments.
Professionals have financial calculators that will show you how much you will need to save in order to have your goal reached. These calculations will take into consideration income, raises, inflation, investment return and goals. If you can afford the monthly amount it gives, then you are in good shape to start saving and planning what you will do in retirement. If you cannot afford the number, then you have some work to do to reduce your expenses and/or increase your income.
Expenses are required like utilities and taxes, are necessary like credit card payments and other things you need on a monthly basis to live comfortably, and there are expenses that are derived from wanting to enjoy things. The first you need to look at are those expenses that can be cut just by living a little lower than your income. A few less meals out, a few less trips to Las Vegas, a few less trips to the mall to buy the thing you can live without. As you revise your monthly budget, you will get a better idea of how realistic your goals are and if you need to push back retirement a few years or by lowering your lifestyle once in retirement.
As with that trip to New York, I mentioned, you cannot setup a plan and just go on auto-pilot. Maybe you want to visit the Grand Canyon, Texas, and Atlanta on the way. If you do, then you need to revise the plan. You need to do an annual analysis of the plan to see if you need to make adjustments. Maybe you got a raise, maybe you had a child, maybe you won the lottery. Change happens and by doing these reviews, you can make adjustments along the way and revise your goals if necessary. Who knows, your investments gave you a few good years, now you can move your retirement date up a year and increase your monthly income by $1000. Who know, but without a plan, you may never realize how close or far your retirement is.
Your financial professional will keep you updated on your plan and you will always be aware of if you will be retiring at 60 with a boat load of income, or having to wait until you are 73 and living with your kids. But, by waiting too long, you are just putting off that information until it is too late. The sooner you start saving, the better you will have in retirement and the sooner you realize how much you need to save, the better you will live between now and that date you set.
Saturday, August 7, 2010
Sunday, April 25, 2010
How Much Does It Cost to Hire a Pricing Manager?
How many times do you think that question is asked in medium to large companies that specialize in wholesale and/or retail operations? Probably many times a year. Keep in mind that in this country the cost of hiring, training, paying, and supporting a mid level manager can be upwards to $100,000 to $200,000 per year depending on the level of support and requirements. Will he or she need to travel? Will he or she need to have advanced software? Will he or she need to attend pricing seminars? Will he or she need to belong to the best pricing organizations? These all have a way of raising the cost or having a good pricing manager on staff.
Keep in mind the costs of not having one. Prices are managed by Executives, marketing, purchasing, sales, finance, IT, etc. Who has a hand in determining what is best for the company and/or their department? Who is the final arbiter when the final price needs to be applied in a given situation? How do you know it is the best price? Executives want to raise the price to keep margins up. Sales want to increase sales by lowering the price. Finance wants margins up, while purchasing wants to raise volumes so they can get better discounts. Who can come in and be independent enough to make the decisions to benefit the company and not just individual departments?
But what is the benefit of having a good pricing manager? Pricing has many facets. By having a person that understands all those facets, or at least most of them, can be extremely valuable to any company. Imagine a company that has 40,000 sku's. What if that company has 200 vendors? Who is going to manage that many items? Who will be able to spend the time necessary to make mass changes and analyze the volume of such a number?
Velocity Pricing
There are many ways a company can create a quick pricing scheme to change pricing to give the biggest impact with the least amount of worry. One of these is a policy called "velocity pricing". Take the products that are the most elastic (least chance of losing business from a price increase) and raise the prices a moderate amount and you will see a small gain in margin.
On the face of this policy, it sounds great. Imagine plugging the bottom 30,000 items into a quick pricing model, take the results and immediately change the prices in the system. Just like that you spent 4 hours and got a quick return of 300% on your time investment. I can see many mangers jumping at that kind of operation. Do that 3 or 4 times a year and you can see a tidy return on not having the need to hire a pricing manager. But what about the downside? How do you know it is working as it is advertised? After 4 times, you are starting to see a 200% return, then a 150% return, then a 75% return, etc. What could be going wrong?
The problem is that you are investing time on the front end, but not on the back end. Had you done the analysis, you would have seen you were incorrectly pricing similar items. This was causing confusion with the customers. You also noticed that the lowest of the products were priced so high that they would always stay in the category to be priced even higher. Since the system looked at volume, it would see that these products would warrant a price increase when the opposite was needed drastically.
Direct Benefits
The direct benefits of having a Pricing Manager are being to have those products that impact your business the most (80/20 rule) would be given the most attention. Those that do not impact your business could be managed on a larger scale. Take the example of velocity pricing (raise price based on volume). Imagine if you had a person that would modify the pricing model to add a modifier to lower the price if the volume was negatively impacted. Also add a modifier if the price exceeded certain market levels. Also, take the time to make the changes similar for items within certain categories. If a 3" model goes up 2%, then so should the 4", and 5" models. This keeps them in order and you are not charging more for a 3" model than a 5"model.
More benefits is being able to use standard pricing ideas. Regional pricing for certain regions in the country. Certain areas of the country place a different priority on price as opposed to service. Promotional pricing to see which products are best used during sales periods. Paired products to use to increase margins on products that are purchased along popular items. This allows the company to improve margins on items that would normally never see an increase. Tiered pricing based on the size and purchase volume of the customers. This could potentially be the best way to improve margins as well as give the sales staff a great tool to promote more business with many customers. Imagine telling a customer on the cusp of the next level that if he raises his volume another 2%, he could see a 5% discount? Although the margin would go slightly down, your overall profit would go up.
End of life pricing also known as clearance pricing. With many wholesalers and retailers, there are always a list of products that were a great idea at one time, but have since been relegated to the back of the warehouse. These products are costing you money in warehousing, inventory, and lost opportunity cost since you could be buying a better product to sell. Being able to price price products that need to be sold quickly can be a big benefit. This is especially true when the number of items grows into a problem with warehouse space or inventory time.
One time pricing opportunities can be a time when you can raise prices when all your customers are expecting a price increase. Once or twice a year, your most popular products are going to see a price increase from your vendor. Since this would be seen across the industry, the customers that use the product the most would be prepared for that increase and adjust accordingly.
Putting a Price on the Benefits
Many times when a Finance Manager or a President is given the question, they want to know the bottom line. What can I expect to gain from a $200,000 investment? If you get a person with 5 or more years of experience, you can expect to see the opportunity to gain all or most of the things mentioned above. If you used tiered pricing the gain would be close to a 1-2% margin gain. Depending on how the margins are set, this could translate to a 1% gain to the bottom line profit. So, if a $200 million company implements this one tool, they can see a $2 million dollar gain in profit. That is a 900% return! Now add the other tools suggested. If all are implemented, that return would skyrocket.
So, if the company is not using any of these tools, or are using some of them without any back end analysis, then the cost of not having a Pricing Manager is weighing the company down. There should be no reason that a mid to upper level company would not have a dedicated person that managed the pricing. Having a well-trained, experienced person would be invaluable and would make yoru sales staff, customers, and executives much happier.
Keep in mind the costs of not having one. Prices are managed by Executives, marketing, purchasing, sales, finance, IT, etc. Who has a hand in determining what is best for the company and/or their department? Who is the final arbiter when the final price needs to be applied in a given situation? How do you know it is the best price? Executives want to raise the price to keep margins up. Sales want to increase sales by lowering the price. Finance wants margins up, while purchasing wants to raise volumes so they can get better discounts. Who can come in and be independent enough to make the decisions to benefit the company and not just individual departments?
But what is the benefit of having a good pricing manager? Pricing has many facets. By having a person that understands all those facets, or at least most of them, can be extremely valuable to any company. Imagine a company that has 40,000 sku's. What if that company has 200 vendors? Who is going to manage that many items? Who will be able to spend the time necessary to make mass changes and analyze the volume of such a number?
Velocity Pricing
There are many ways a company can create a quick pricing scheme to change pricing to give the biggest impact with the least amount of worry. One of these is a policy called "velocity pricing". Take the products that are the most elastic (least chance of losing business from a price increase) and raise the prices a moderate amount and you will see a small gain in margin.
On the face of this policy, it sounds great. Imagine plugging the bottom 30,000 items into a quick pricing model, take the results and immediately change the prices in the system. Just like that you spent 4 hours and got a quick return of 300% on your time investment. I can see many mangers jumping at that kind of operation. Do that 3 or 4 times a year and you can see a tidy return on not having the need to hire a pricing manager. But what about the downside? How do you know it is working as it is advertised? After 4 times, you are starting to see a 200% return, then a 150% return, then a 75% return, etc. What could be going wrong?
The problem is that you are investing time on the front end, but not on the back end. Had you done the analysis, you would have seen you were incorrectly pricing similar items. This was causing confusion with the customers. You also noticed that the lowest of the products were priced so high that they would always stay in the category to be priced even higher. Since the system looked at volume, it would see that these products would warrant a price increase when the opposite was needed drastically.
Direct Benefits
The direct benefits of having a Pricing Manager are being to have those products that impact your business the most (80/20 rule) would be given the most attention. Those that do not impact your business could be managed on a larger scale. Take the example of velocity pricing (raise price based on volume). Imagine if you had a person that would modify the pricing model to add a modifier to lower the price if the volume was negatively impacted. Also add a modifier if the price exceeded certain market levels. Also, take the time to make the changes similar for items within certain categories. If a 3" model goes up 2%, then so should the 4", and 5" models. This keeps them in order and you are not charging more for a 3" model than a 5"model.
More benefits is being able to use standard pricing ideas. Regional pricing for certain regions in the country. Certain areas of the country place a different priority on price as opposed to service. Promotional pricing to see which products are best used during sales periods. Paired products to use to increase margins on products that are purchased along popular items. This allows the company to improve margins on items that would normally never see an increase. Tiered pricing based on the size and purchase volume of the customers. This could potentially be the best way to improve margins as well as give the sales staff a great tool to promote more business with many customers. Imagine telling a customer on the cusp of the next level that if he raises his volume another 2%, he could see a 5% discount? Although the margin would go slightly down, your overall profit would go up.
End of life pricing also known as clearance pricing. With many wholesalers and retailers, there are always a list of products that were a great idea at one time, but have since been relegated to the back of the warehouse. These products are costing you money in warehousing, inventory, and lost opportunity cost since you could be buying a better product to sell. Being able to price price products that need to be sold quickly can be a big benefit. This is especially true when the number of items grows into a problem with warehouse space or inventory time.
One time pricing opportunities can be a time when you can raise prices when all your customers are expecting a price increase. Once or twice a year, your most popular products are going to see a price increase from your vendor. Since this would be seen across the industry, the customers that use the product the most would be prepared for that increase and adjust accordingly.
Putting a Price on the Benefits
Many times when a Finance Manager or a President is given the question, they want to know the bottom line. What can I expect to gain from a $200,000 investment? If you get a person with 5 or more years of experience, you can expect to see the opportunity to gain all or most of the things mentioned above. If you used tiered pricing the gain would be close to a 1-2% margin gain. Depending on how the margins are set, this could translate to a 1% gain to the bottom line profit. So, if a $200 million company implements this one tool, they can see a $2 million dollar gain in profit. That is a 900% return! Now add the other tools suggested. If all are implemented, that return would skyrocket.
So, if the company is not using any of these tools, or are using some of them without any back end analysis, then the cost of not having a Pricing Manager is weighing the company down. There should be no reason that a mid to upper level company would not have a dedicated person that managed the pricing. Having a well-trained, experienced person would be invaluable and would make yoru sales staff, customers, and executives much happier.
Monday, November 30, 2009
Resume
Michael A Vargas, MBA
shooter486@aol.com
Summary
A highly dynamic, team-oriented Pricing Manager with management, quantitative analysis, detailed price modeling, and strong PC/spreadsheet skills. I have excellent multi-tasking skills, experience in process improvement and cost cutting, project planning, data mining, business intelligence tools, creative problem solver, able to learn new jobs and duties with a short period of time, strong work ethic, self motivated, with the ability to work alone or in teams. I am constantly trying to improve myself.
Skills
• Price Modeling
• Quantitative Analysis
• Data Management
• Advanced MS Office
• Advanced Brio (Hyperion)
• SAP
• Lotus Notes
• Project Management
• Process Improvement
• Team Building
• Problem Solver
• SQL Server (In Progress)
• Quick Learner
• Six Sigma (In Progress)
• Root Cause Analysis
Education
Masters in Business Administration (MBA)
University of Phoenix Ontario, CA June 2007
B.S. in Business Management
University of Phoenix Ontario, CA January 2005
Experience
Biosense Webster – Diamond Bar, CA
A $200 Million Medical Device Company
Pricing Consultant - Pricing Project - July 2009 – Sept 2009
• Analyze Current Pricing Structure
• Streamline and Consolidate various Pricing Schemes
• Develop Strategy to Improve Pricing Structure to Impact the Fewest Key Customers
• Calculate Customer Impact/Margin Benefit of Project
• Present Findings to Sales Management and Executives
• Achievements:
- $1.3 Million Improvement to Product Margin
Carrier Sales & Distribution—Brea, CA
A $180 Million Distribution Division of Carrier Corporation
Pricing Analyst, April 2008-April 2009
• Develop the position to coordinate pricing amongst 6 departments within company.
• Develop price model to track sales trends and pricing opportunities.
• Establish and administer strategic pricing policy.
• Forecast impact of price changes and conduct post mortem variance analysis.
• Review and implement all periodic and ad hoc pricing changes.
• Create improvements to efficiency and time savings
• Coordinated the consolidation of pricing for two divisions (No CA & So CA)
• Achievements:
- Developed a project to lessen inventory by $4 million of surplus products.
- Created a coordinated process to bring 6 departments together for all pricing projects.
- Created processes to administer new product releases and major changes to existing products.
- Created annual product book along with automated price sheet that matched specific dealer pricing.
Louis and Company—Brea, CA
A $200 Million Woodworking Wholesale Distribution Company
Pricing Manager, March 2007-Dec 2007
• Create new position to analyze, research, compile, create, and report market prices from several sources
• Develop relationship with Purchasing, Marketing, Accounting, and IT to maintain open communication on prices
• Establish and administer strategic pricing policy
• Forecast impact of price changes and conduct post mortem variance analysis
• Review and implement all periodic and ad hoc pricing changes
• Create and lead a strategic pricing group to develop short and long term pricing plan
• Educate sales teams on pricing policy and margin improvement
• Achievements:
- Developed pricing model to improve margin by additional 5% on all scheduled price updates.
- Streamlined 25,000 item price list to within market price levels improving sales ability to use list and save time and money from overriding prices.
- Improved gross margin on largest product lines by annualized $140,000.
- Created pricing methodology that would improve margin with minimal impact to sales.
- Participated in SAP upgrade with zero major defects providing a seamless transition to the customers.
BAX Global—Irvine, CA
A $2.3 Billion International Air Freight/Ocean/Logistics Company
March 1998-Feb 2007
Global Pricing Analyst, 2005-2007
• Create financial models to provide profitable pricing for global services
• Develop and communicate price quotes for Fortune 500 customers
• Forecast sales and revenue of new and existing products
• Create pricing models to validate research and improve efficiency
• Research competitor profiles to maintain market pricing
• Achievements:
- Participated in bid proposals with 10 wins exceeding $5 million in new business
- Employee of the month July 2000 for the finance department
Tariff Department Supervisor/Business Analyst, 1998-2005
• Create and present financial data to middle and executive management
• Review and approve middle and low level pricing
• Create and implement plans for planned increases of rates and charges
• Analyze sales history of products and provide a recommendation to improve results.
• Achievements:
- Created and implemented plans to create a more efficient work environment saving time, money, and effort.
- Developed projects that help automate daily activities.
- Reviewed and removed obsolete rates and prices that improved efficiency and speed.
- Participated in 2 major ISO 9001 compliance audits resulting in zero major “non-conformities” (defects).
Military Experience
United States Air Force Norton Air Force Base, CA
• Law Enforcement Specialist (AFSC# 81152)
• Honorable Discharge
Interests
• My Family, Reading (Self Improvement), Coaching Little League, Stock Market
shooter486@aol.com
Summary
A highly dynamic, team-oriented Pricing Manager with management, quantitative analysis, detailed price modeling, and strong PC/spreadsheet skills. I have excellent multi-tasking skills, experience in process improvement and cost cutting, project planning, data mining, business intelligence tools, creative problem solver, able to learn new jobs and duties with a short period of time, strong work ethic, self motivated, with the ability to work alone or in teams. I am constantly trying to improve myself.
Skills
• Price Modeling
• Quantitative Analysis
• Data Management
• Advanced MS Office
• Advanced Brio (Hyperion)
• SAP
• Lotus Notes
• Project Management
• Process Improvement
• Team Building
• Problem Solver
• SQL Server (In Progress)
• Quick Learner
• Six Sigma (In Progress)
• Root Cause Analysis
Education
Masters in Business Administration (MBA)
University of Phoenix Ontario, CA June 2007
B.S. in Business Management
University of Phoenix Ontario, CA January 2005
Experience
Biosense Webster – Diamond Bar, CA
A $200 Million Medical Device Company
Pricing Consultant - Pricing Project - July 2009 – Sept 2009
• Analyze Current Pricing Structure
• Streamline and Consolidate various Pricing Schemes
• Develop Strategy to Improve Pricing Structure to Impact the Fewest Key Customers
• Calculate Customer Impact/Margin Benefit of Project
• Present Findings to Sales Management and Executives
• Achievements:
- $1.3 Million Improvement to Product Margin
Carrier Sales & Distribution—Brea, CA
A $180 Million Distribution Division of Carrier Corporation
Pricing Analyst, April 2008-April 2009
• Develop the position to coordinate pricing amongst 6 departments within company.
• Develop price model to track sales trends and pricing opportunities.
• Establish and administer strategic pricing policy.
• Forecast impact of price changes and conduct post mortem variance analysis.
• Review and implement all periodic and ad hoc pricing changes.
• Create improvements to efficiency and time savings
• Coordinated the consolidation of pricing for two divisions (No CA & So CA)
• Achievements:
- Developed a project to lessen inventory by $4 million of surplus products.
- Created a coordinated process to bring 6 departments together for all pricing projects.
- Created processes to administer new product releases and major changes to existing products.
- Created annual product book along with automated price sheet that matched specific dealer pricing.
Louis and Company—Brea, CA
A $200 Million Woodworking Wholesale Distribution Company
Pricing Manager, March 2007-Dec 2007
• Create new position to analyze, research, compile, create, and report market prices from several sources
• Develop relationship with Purchasing, Marketing, Accounting, and IT to maintain open communication on prices
• Establish and administer strategic pricing policy
• Forecast impact of price changes and conduct post mortem variance analysis
• Review and implement all periodic and ad hoc pricing changes
• Create and lead a strategic pricing group to develop short and long term pricing plan
• Educate sales teams on pricing policy and margin improvement
• Achievements:
- Developed pricing model to improve margin by additional 5% on all scheduled price updates.
- Streamlined 25,000 item price list to within market price levels improving sales ability to use list and save time and money from overriding prices.
- Improved gross margin on largest product lines by annualized $140,000.
- Created pricing methodology that would improve margin with minimal impact to sales.
- Participated in SAP upgrade with zero major defects providing a seamless transition to the customers.
BAX Global—Irvine, CA
A $2.3 Billion International Air Freight/Ocean/Logistics Company
March 1998-Feb 2007
Global Pricing Analyst, 2005-2007
• Create financial models to provide profitable pricing for global services
• Develop and communicate price quotes for Fortune 500 customers
• Forecast sales and revenue of new and existing products
• Create pricing models to validate research and improve efficiency
• Research competitor profiles to maintain market pricing
• Achievements:
- Participated in bid proposals with 10 wins exceeding $5 million in new business
- Employee of the month July 2000 for the finance department
Tariff Department Supervisor/Business Analyst, 1998-2005
• Create and present financial data to middle and executive management
• Review and approve middle and low level pricing
• Create and implement plans for planned increases of rates and charges
• Analyze sales history of products and provide a recommendation to improve results.
• Achievements:
- Created and implemented plans to create a more efficient work environment saving time, money, and effort.
- Developed projects that help automate daily activities.
- Reviewed and removed obsolete rates and prices that improved efficiency and speed.
- Participated in 2 major ISO 9001 compliance audits resulting in zero major “non-conformities” (defects).
Military Experience
United States Air Force Norton Air Force Base, CA
• Law Enforcement Specialist (AFSC# 81152)
• Honorable Discharge
Interests
• My Family, Reading (Self Improvement), Coaching Little League, Stock Market
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