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Increase or Decrease Your Prices??

Price Increases versus Price Decreases.

Help from www.BHMA.co.uk

Table A
This table shows the affect of Price Decreases.

If you decrease your prices by the percentage number on the left you will need the increase of business shown to retain the same cash profit.


Retail Price ReductionExisting % Gross Margin Being Achieved.
35%40%45%50%55%60%65%
Volume increase required for the same gross margin
2%6554433
4%1311109877
6%21181514121110
8%30252219171514
10%40332925222018
12%52433632282523
14%67544539343027
16%84675547413633
18%106826756494338
20%1331008067575044

Example: If you decrease your prices by 6% (Ordinarily making 50% margin) and this causes your sales to increase by 6%, it is not worth doing as you will be 8% margin worse off.

Table B
This table shows the affect of Price Increases.

If you increase your prices by the percentage number on the left you can loose business volume shown and retain the same cash profit.

Retail Price IncreaseExisting % Gross Margin Being Achieved.
35%40%45%50%55%60%65%
Volume increase required for the same gross margin
2%5544433
4%10987766
6%151312111099
8%19171514131211
10%22201717151413
12%26232119181716
14%29262422201918
16%31292623232120
18%34312926252322
20%36333129272524

Example: If you increase your prices by 6% (Ordinarily making 50% margin) and this causes your sales to fall just 6%, then it is worth doing as you will be 5% margin better off.
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