Pricing For Profit

| Total Words: 327

To improve your profitability you must either make a larger gross margin on each dollar of sales or sell more without increasing your fixed costs. It goes without saying that the greatest improvement will be realised when you achieve both simultaneously.

Remember your gross margin is the difference between the price of your product and what it costs you to buy or make it. Therefore, the only way to increase your gross margin is to sell at a higher price or buy at a lower price.

In most instances (but not all!) you will have limited scope to buy at a lower price. For this reason your selling price is the critical variable.

Without doubt, the biggest single barrier preventing small business managers from making an acceptable profit is their refusal to charge a price which will enable them to achieve this. You are not in business to match the price your competitors set, but you are there to service your customers.

In fact, studies of the factors people regard as important influences on their decision to deal with a particular business indicate that product and price are relevant in only 15% of cases.

It is the lazy manager’s competitive...

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