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If you cut prices 10%, you need 20% more units installed to break-even!!!
I was figuring our breakeven point yesterday and some very interesting information came to light.
If we raise our price 10%, we can lose over 20% in unit volume and make the same amount of money.
So the opposite is also true: if we lower our price 10%, we have to increase volume by 20% to make up the difference.
The lesson is that we have to increase our prices in order to get our breakeven point down to a "safe" level (not so high that we can't achieve it every month).
And, to those who want to gain volume by cutting their prices, you are on a downward slope of losing money. You can't get enough extra volume to make up for the lost revenues.
We increased our cash prices by $20 or so (haven't had it affect our sales volume either) and are doing less incentives (not that we do a lot now) as well.
Money is so tight with all the insurance cuts that we must do this to stay open.
Re: If you cut prices 10%, you need 20% more units installed to break-even!!!
Margins used to have enough profit that one could justify reduced price for volume. Like a fleet needing 6 or so all at the same time. Margins are so thin today anyone cutting anything I say good luck to ya cause you may not even be BREAKING EVEN. What a horrible term to use in business. We should not even be close to break even, we can't get non-profit statis! We will only do profitable work, otherwise I'm gone Fishin!