Price or Overhead
Raise prices a little, or cut costs?
Put in a year of sales and what it costs to run the business. You will see which small change is worth more to your profit.
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The answer, for one year
A 3% price rise is worth about 2 times what a 10% overhead cut is.
Plain arithmetic: sales times the price rise, and overhead times the cut. It assumes you keep every customer and nothing else changes.
Why
Why a small price rise usually wins.
A price rise adds to every sale without adding to the work. Same jobs, same hours, a little more for each one.
Overhead is usually a much smaller number than sales. So 3% of the big number often beats 10% of the small one, and cutting costs that deep can mean cutting things the business needs.
It is not always the answer. If customers would leave, the math changes, and that is worth thinking through before you move a price.
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Ink & Crucible
A short note from me, now and then.
Money, books and running a small business in Hawaii, in plain words.
Before you change a price, know your numbers.
I go through your QuickBooks and show you what I find, whether or not you hire me.