Should I Change My Price Structure?
Are you considering a price increase or decrease, but are uncertain of how it will affect your gross profit? The following two tables will help take the guesswork and mystery out of changing your prices by allowing you to see what effect a price change will have in terms of the number of customers you will have to gain or lose in order to sustain your current gross profit percentage or increase it. I hope this helps you better run your business.
| Your Current Gross Profit Margin | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 20% | 25% | 30% | 35% | 40% | 45% | 50% | 55% | 60% | |
| If You Increase Your Prices By: | To Produce the Same Gross Profit Margin, You Could Reduce Your Sales Volume By: | ||||||||
| Example: Question: | If your company's current gross profit percentage is 30%, what effect would a 10% price increase have? | ||||||||
| Answer: | Your company could sustain a 25% reduction in sales before your gross profit percentage falls below the current 30%. In plain English, you would have to lose one out of every four customers before you would realize a reduction in your 30% gross profit percentage. | ||||||||
| Source: Results Accountants' Systems | |||||||||
| 2% | 9% | 7% | 6% | 5% | 5% | 4% | 4% | 4% | 3% |
| 4% | 17% | 14% | 12% | 10% | 9% | 8% | 7% | 7% | 7% |
| 6% | 23% | 19% | 17% | 15% | 13% | 12% | 11% | 10% | 9% |
| 8% | 29% | 24% | 21% | 19% | 17% | 15% | 14% | 13% | 12% |
| 10% | 33% | 29% | 25% | 22% | 20% | 18% | 17% | 15% | 14% |
| 12% | 38% | 32% | 29% | 26% | 23% | 21% | 19% | 18% | 17% |
| 14% | 41% | 36% | 32% | 29% | 26% | 24% | 22% | 20% | 19% |
| 16% | 44% | 39% | 35% | 31% | 29% | 26% | 24% | 23% | 21% |
| 18% | 47% | 42% | 38% | 34% | 31% | 29% | 26% | 25% | 23% |
| 20% | 50% | 44% | 40% | 36% | 33% | 31% | 29% | 27% | 25% |
| 25% | 56% | 50% | 45% | 42% | 38% | 36% | 33% | 31% | 29% |
| 30% | 60% | 55% | 50% | 46% | 43% | 40% | 38% | 35% | 33% |
| Your Current Gross Profit Margin | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 20% | 25% | 30% | 35% | 40% | 45% | 50% | 55% | 60% | |
| If You Reduce Your Prices By: | To Produce the Same Gross Profit Margin, You Must Increase Your Sales Volume By: | ||||||||
| Example: Question: | If your company's current gross profit percentage is 30%, what effect would a 10% price reduction have? | ||||||||
| Answer: | In order to sustain the current gross profit percentage of 30% after reducing your prices by 10%, you will need sales volume to increase by 50%. | ||||||||
| Source: Results Accountants' Systems | |||||||||
| 2% | 11% | 9% | 7% | 6% | 5% | 5% | 4% | 4% | 4% |
| 4% | 25% | 19% | 15% | 13% | 11% | 10% | 9% | 8% | 7% |
| 6% | 43% | 43% | 25% | 21% | 18% | 15% | 14% | 12% | 11% |
| 8% | 67% | 47% | 36% | 30% | 25% | 22% | 19% | 17% | 15% |
| 10% | 100% | 67% | 50% | 40% | 33% | 29% | 25% | 22% | 20% |
| 12% | 150% | 92% | 67% | 52% | 43% | 36% | 32% | 28% | 25% |
| 14% | 233% | 127% | 88% | 67% | 54% | 45% | 39% | 34% | 30% |
| 16% | 400% | 178% | 114% | 84% | 67% | 55% | 47% | 41% | 36% |
| 18% | 900% | 257% | 150% | 106% | 82% | 67% | 56% | 49% | 43% |
| 20% | - | 400% | 200% | 133% | 100% | 80% | 67% | 57% | 50% |
| 25% | - | - | 500% | 250% | 167% | 125% | 100% | 83% | 71% |
| 30% | - | - | - | 600% | 300% | 200% | 150% | 120% | 100% |
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