Determining The Impact of Raising Your Prices Using Beyond Breakeven (tm)

Beyond Breakeven makes it very easy to play "what-if" scenarios. The following screen demonstrates what your own screen may look like after calculating the impact of raising your prices. Please note the retail price (in this example it is service labor), the projected quantity sold, and the net profit.

Now observe the impact of raising your price by just $10.00 per hour. Observe the net profit. It has increased to $71,149.92, up by $53,224.60. That's an increase of 297%. Consider that carefully. A 297% increase in profits due to a $10.00 increase in price (just 15.39%). In other words, raise your price by approximately 15% and achieve a increase in profits by about 297%. The proof is in the software!

Are you worried that a price increase may cause you to loose customers?

O.K., we'll maybe you're right. The real question is . . . do you care?

Now calculate how much business we would have to loose, with our new service rate, to get back to our original net profit of $17,925.32. We have adjusted the number of service hours sold down to 4225, to achieve a net profit of $17,921.09 (that's as close as we could get). This is a decrease of 23%. In other words, an increase in your service rates of $10.00 hour will generate the same net profit with 23% less work. Would you be interested in making the same money while doing 23% less work.

You should note that a 5.66% net profit, while the same as our original example above in terms of dollars, actually means that your company is more efficient in producing profit.

You should also ask yourself the following questions: Will 23% of my customers fire me the very first day that I raise my prices? Using my 23% increase in "free time" will I acquire additional customers to take their place? If I increase my service warranty, can I "justify" the price increase to my customers and keep most all of them? Experiment with this concept by adding, to your variable and fixed overhead, the cost of additional warranty coverage, more professional uniforms, additional training, etc. Build value into your work and you will keep your customers . . . not mention make a lot more money!

You may also be able to finally pay your technicians what they're worth. Won't that make it easier to find new ones and keep the ones you have now? You have to do something!

Next, you may experiment with the calculator by adjusting retail prices, quantity sold, overhead, etc. You will learn a great deal about which items have a more significant impact on profitability. In fact, you will learn, as we have, there is nothing more powerful to the bottom line than raising your prices.

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