Pricing Illusion

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have a prayer session before raising the price by 10 percent, then you’ve got a terrible business” – Warren Buffet

A lesson that we have been learning and re-learning is that price is the most effective profit driver. Price can generate huge profits or destroy margins. If possible, avoid price cuts. They may bring you volume and market share, but they often kill profits.

Take for example a 5% cut in price, it is a bigger cut to your profits than first realised (see example below). As they say, ‘manage for profit, not for market share’.

If you are looking at ways that can help drive revenue and profit, feel free to give us a call for a casual chat on 1300 235 378.