Price increase question

[slicksilver]

Hello all

I'm not Math major or a Math champ but just a guy doing a retail store business. Would like to know how much the sales volume has to increase when price is reduced by a certain % keeping the same profit if my margin is 5%,10% and 15%. I got the file from a old page which had no explanation how they figures came up. If someone can explain me the concept I would like to do this in excel.

Thanks!


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[slayer202]

Unfortunately I can't see the linked image, imageshack is blocked at work, but if you want to pm me in another format or with the excel I can help you out

 

[JPerk]

Here's what the chart is doing,

20% margin minus 2% reduction is 18%. To get profit back to 20%, you need to increase that 18% by 2%. 2/18 =11% increase in sales.

20-4=16. 4/16=25% increase in sales.

 

[kranky]

Good answer from JPerk.

On a side note, it's amazing that you could survive in retail with tiny margins of 5%, 10% and 15%.

 

[slicksilver]

Here's what the chart is doing,

20% margin minus 2% reduction is 18%. To get profit back to 20%, you need to increase that 18% by 2%. 2/18 =11% increase in sales.

20-4=16. 4/16=25% increase in sales.

Mega thanks to you.

 

[slicksilver]

Good answer from JPerk.

On a side note, it's amazing that you could survive in retail with tiny margins of 5%, 10% and 15%.

I'm not which is the reason why I'm wondering if its a good idea to pull the plug.

 

[slayer202]

I'm not which is the reason why I'm wondering if its a good idea to pull the plug.

reducing prices won't save you. you have to cut costs somehow, any way possible

 

[daddy-o]

Reducing prices can save you if the demand is highly elastic.

 

[kranky]

Yes, before eating into your already razor-thin margins by lowering prices, what other options are available? Why do you think lowering prices will increase profits? Maybe ATOT can brainstorm some alternatives for you.

 

[slayer202]

Yes, before eating into your already razor-thin margins by lowering prices, what other options are available? Why do you think lowering prices will increase profits? Maybe ATOT can brainstorm some alternatives for you.

More details would be helpful. But going to extremes to cut costs would be the first idea. Might as well try that before giving up completely

 

[Barfo]

Just jack the prices up until people stop buying stuff, then lower them a little bit.

 

[randomrogue]

Your largest cost savings is generally going to be payroll.