B.G.Connor & Co are UK Accountants and Registered Auditors.

ANSWER: PUT YOUR PRICES UP!

Let us show you why:

Original Situation

Sales: 100 widgets sold at £100 each	10,000
Cost of Sales: 100 widgets cost £70 each	7,000
Gross Profit (30%)	3,000
Fixed Overheads	2,500
Net Profit	500

Option 1 (Prices up 10% and sales down 20%)

Sales: 80 widgets sold at £110 each	8,800
Cost of Sales: 80 widgets cost £70 each	5,600
Gross Profit	3,200
Fixed Overheads	2,500
Net Profit	700

Option 2 (Prices down 10% and sales up 20%)

Sales: 120 widgets sold at £90 each	10,800
Cost of Sales: 120 widgets cost £70 each	8,400
:Gross Profit	2,400
Fixed Overheads	2,500
Net Loss	(100)

So putting your prices up by 10% in this example raises the profits from £500 to £700, which is a rise in profits of a staggering 40%.

What you should do will vary from business to business. You need to look at the gross profit percentage in each business and on your perception of how the quantity of sales will change in reaction to the price change. To help you in your own individual business click here for a chart that will show you the quantity of sales your own business can afford to lose or needs to gain if you change your prices in order to benefit from a price change. If you are going to implement anything please talk to us first.



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