Discounts can easily destroy your profits....

If you sell your product or service at a gross profit of 40%:

• Offering a 5% discount means you need to sell 14% more volume to make the same dollar amount of gross profit.
• Offering a 10% discount means you need to sell 33% more volume.
• Offering a 20% discount means you need to sell twice as much!
• Offering a 30% discount means you need to sell four times as much!
• Offering a 40% discount means you don't break even no matter how much you sell!

These numbers also work in reverse. The higher your price, the less volume you have to produce for a given dollar amount of profit! Even a small price increase can generate significant additional profit.

We know what you're thinking: What if I increase my price so much that I drive away most of my customers? If you've done your homework and are providing more perceived value for your customers than you are charging, this won't be a problem. Even companies that have a monopoly in the marketplace are limited by that perception of value. When a business comes out with a new product or service and they are the first to market, they may be able to charge high prices initially. But those higher prices can't be sustained for very long. Other businesses will see those prices and develop their own lower-cost alternatives. Examples throughout history abound. And the higher the initial price and profit margin, the faster a competitor will come to market with a less expensive alternative. Don't let this possibility keep you from increasing your prices!

Instead, enjoy the additional profitability and reduced workload. Use that increased profit to BUY YOURSELF SOME TIME for the strategic work of reducing your costs, laying the foundation for growth, and researching new market opportunities. Reducing your costs ultimately allows you to reduce your prices while maintaining the same level of profitability, but you need time and money to create that value for your customers and for your business. Don't sell yourself short. You and your business are worth it!

Chris Wilkinson.                              

Certified Business Behaviour & Attitudes Analyst.               

Business Coach.

Tel: (905) 275-2907 (Mississauga).

E-mail: buspilot@bell.net