How price drives the numbers.
WHY PRICE IS THE MOST POWERFUL LEVER
A price change flows entirely to profit; a volume change does not.
WHAT THAT MEANS ARITHMETICALLY
A modest price increase can produce a disproportionate profit increase.
WHAT A DISCOUNT COSTS
The same arithmetic in reverse, and it is worse than it appears.
WHAT TO CALCULATE BEFORE DISCOUNTING
How much additional volume is needed to stand still.
HOW
The discount, relative to your gross margin.
WHAT THAT REVEALS
That low-margin businesses need enormous extra volume to justify small discounts.
WHAT TO DO WITH THAT NUMBER
Show it to anyone proposing a discount.
WHAT TO ESTABLISH
Your margin by product, service and customer.
WHY BY CUSTOMER
Some customers consume far more support than others.
WHAT TO MEASURE
Time spent per customer, at least roughly.
WHAT THAT FREQUENTLY REVEALS
That some customers are unprofitable.
WHAT TO DO ABOUT THEM
Raise their price, reduce what is included, or decline further work.
WHAT TO REVIEW ANNUALLY
Whether prices still cover costs.
WHY ANNUALLY AT MINIMUM
Costs rise continuously and prices held constant erode margin silently.
WHAT TO DO WHEN COSTS RISE MATERIALLY
Adjust prices, with notice and a reason.
WHAT TO AVOID
Competing on price without the cost structure to support it.
WHAT TO PREFER
Establishing value, so price is not the comparison.
