ADEXMA
Margin · free tool · no email

Is this order worth accepting at this price?

A quote can look healthy on price minus material and still lose money once setup, commission, freight and the time you wait to be paid are counted. This shows the margin that is left and the lowest price that meets your target.

Your assumptions

Worked-example values — replace with yours
Quote profitability · Estimated
27.7%
margin left on this order
Margin in dollars: $16,608this order
Cost of waiting to be paid: $59245 days at 8% a year
Lowest price that meets your target: $115per unit
Meets your target. The order clears the margin you asked for. Check that capacity is not better used elsewhere.

Variable costs only; shared overhead is not allocated.

This is an estimate. Check it on your own data.

One quote is a decision; a year of quotes is a pattern. Comparing what you quoted with what you won and what you kept is what a workspace does on your own data.

Check it on my data →

Your inputs travel with you into the request, or into the free Margin Scan. Nothing is sent to ADEXMA until you submit a form.

The formula

  • order value = quantity × price
  • cost of waiting = order value × (payment days ÷ 365) × cost of capital
  • margin = order value × (1 − freight and commission %) − quantity × variable cost − setup − cost of waiting
  • lowest price = (quantity × variable cost + setup) ÷ (quantity × (1 − freight % − cost of waiting % − target %))

Worked example · the values pre-filled above

Quantity quoted: 500 units · Quoted price: $120 per unit · Variable cost: $78 per unit · Setup, tooling and one-off costs: $2,000 · Freight absorbed and sales commission: 3 % of order value · Payment terms: 45 days · Your cost of capital: 8 % a year · Target margin after all of the above: 25 % of order value

  1. Order value = 500 × $120 = $60,000. Freight and commission 3% = $1,800.
  2. Cost of waiting = $60,000 × (45 ÷ 365) × 8% = $592.
  3. Margin = $60,000 − $1,800 − 500 × $78 ($39,000) − $2,000 setup − $592 = $16,608, which is 27.7% of the order.
  4. Against a 25% target the order clears; the lowest price that still meets 25% is about $115.47 a unit.

Result: 27.7% margin · accept

What this assumes

  • Only costs caused by this order are counted; shared overhead is excluded.
  • Payment terms are costed at your cost of capital, whatever the customer actually does.
  • Freight and commission are a percent of order value.
  • It is an estimate from your own inputs. Results from different tools overlap and must never be added together into one savings figure.

Sources

  • Nagle, T., Hogan, J. & Zale, J., The Strategy and Tactics of Pricing (Routledge, 6th ed.) — Contribution-based pricing and cost-to-serve.
  • Brealey, R., Myers, S. & Allen, F., Principles of Corporate Finance (McGraw-Hill) — Cost of capital applied to receivables.

Questions people ask

How do I know if a quote is profitable?

Subtract everything the order causes — materials, labour, setup, freight, commission and the cost of waiting to be paid — from the order value. Compare what is left with your target margin.

Why count payment terms?

Waiting 45 days for $60,000 ties up cash that costs money. At 8% a year it is about $592 on this order — small alone, large across a book of orders.

Related tools

MarginDiscount break-evenCan we afford this discount? How many more units must we sell to break even?MarginPocket-price leakageHow much of our list price do we actually keep after discounts, rebates and freight?

On your own data, Victor picks up this finding in a workspace and your advisor confirms it. See what each plan adds →

Quote Profitability Calculator — Is This Order Worth Accepting? | ADEXMA