Making a pricing decision. Haven't run the math. About to make an expensive mistake.



Your profit margins deserve mathematical analysis. Your financial performance depends on understanding the real impact.

The exercise every business owner needs before changing prices:

Step 1: Identify your current gross profit margin.

Step 2: Identify the price change you're considering.

Step 3: Calculate the volume change required.

If decreasing price: Volume increase needed = Price decrease ÷ (Current margin - Price decrease)

If increasing price: Volume you can lose = Price increase ÷ (Current margin + Price increase)

Step 4: Ask yourself critical questions.

Can I realistically achieve that volume change? What operational changes would that require? What would happen to quality and customer experience at that volume?

Your business efficiency depends on realistic assessment. Your profitability strategies must be based on math, not hope.

Example: 30% gross margin, considering 10% price cut.

Required volume increase = 10% ÷ (30% - 10%) = 50%

You need 50% more volume just to break even on gross profit dollars. Can you actually double your capacity? Do you want to?

Your earnings improvement comes from running this calculation before every pricing decision. Your cash flow management benefits from understanding the real requirements.

Most business owners skip this step. They make pricing decisions based on feelings, competitive pressure, or customer complaints-without understanding the mathematical reality.

You're running the numbers. Making decisions based on facts. Understanding exactly what each pricing choice requires for success or survival.

Business Owners hire Next Step CFO to double and triple their profit using business and financial strategies that their competition isn't doing.