1.
“Statistically, 16 out of 17 businesses in the United States will
fail and/or go out-of-business – most of them in the first two years of
their existence. The average
life expectation for all businesses in the United States is estimated at 7.5
years. If your business is not 8 years old, the odds are it never will be!”
2.
Approximately, 75% of all new businesses in the United States fail
within the first two years. When
businesses start losing money they cut their prices. If you try to match their prices, you too will go broke.
3.
Typically, when a business goes broke, three things occur:
a.
They experience a period of declining gross margin.
b.
Wages, as a percentage of sales, begin to increase.
c.
Sales volume begins to increase (they try to increase sales by
decreasing price).
4.
“Price is virtually never the primary reason that anybody buys
anything”.
5.
“Price is virtually always more important in the mind of the seller
than in the mind of the buyer”.
6.
“In a study of 64 firms, -- price was the reason for dropping a
particular vendor only 8.1% of the time”.
7.
“Price makes a statement: a credible statement.” When you set a
price, you are telling prospective customers what you think the product or
service is worth. The higher
the price, the higher the value or worth.”
8.
“A commodity, by definition, is any item about which there are no
discernible differences, one from another.”
“At many service stations in the United States, when one punches
‘credit’ instead of ‘cash’ one has voluntarily elected to pay about
a 5% premium for the identical gasoline
– not just almost identical --
THE IDENTICAL – GASOLINE.”
9.
“When one cuts price 10% in a business that has products in the 35%
gross margin range, they will probably only have to double the amount of
product they sell at that price to ‘make it up in volume’.
But, a business with a 25% margin for the same 10% price cut, will
probably have to sell more than three times as much volume to ‘make it
up’.”
10.
“In a 35% gross margin business, when price is raised 10%, sales
can fall about 34% and the company will make the same amount of money it was
making before the price increase. But,
if a company with a 25% gross margin raises prices 10%, it can probably lose
41% or so of its business, and still make the same amount of money.”
Break Even Volume =
Fixed SG&A Costs
% Gross Margin - % Variable Expense
