The Effects of Lowering or Raising Price

In this simplified illustration, Job 1 (which could be Product 1) is priced at $200 and the cost of producing it is $100, which would give you a $100 profit.

Job 2 offers a discount of 20 percent, which would make the price $160. Guess what doesn’t change? The cost! It still costs $100 to do that job! So that means your profit went down to $60.

That’s a 40 percent drop!

What if you could position your company in a way that you could charge 20 percent more instead of less? What do you think would happen?

Let’s take a look…

Job 3 is priced at $240 instead of $200. What stays the same? The cost! $240 minus $100 gives us $140 profit. And by the way, the difference in profit from Job 2 and Job 3 is 2.33 times the amount.

That means you could do half the work and make more money!

Or do the same volume and make more than twice the money. This is a very important concept for smaller companies to understand. It’s not in the volume (with any company), it’s in the profit. It is terribly important as independent business owners to understand this because we don’t have a national brand to generate leads for us. We have an entirely different set of benefits to offer, which are worth far more.