Selling Below Cost While Making A Profit

Can you sell your product or service below cost and still make a profit? You can if you look at the big picture and not become a micro numbers person. In other words do not break down the profit margin to the smallest individual detail on each individual item you sell or service.

Managers and owners say, “I need to sell my product at X$ to cover my expenses”, for that item.  Others say, “I must get a minimum of X$ to pay my worker’s wages”, for that service.

Look at the bigger picture. Here is an Example:

You buy 100 widgets at $100, making your cost $10,000. To make a profit and cover all costs on the 100 widgets your mark-up is 45%.  You need to bring in $14,500. You can sell them each for $145 and hope to sell out and make your number, or you can sell them at different price points.

Sell 50 at $155 for a total of $7,750.

Sell 25 at $150 for a total of $3,750.

Sell 15 at $145 for a total of $2,175.

Sell 10 At $90 for a total of $900.

Your sales total is $14,575, making your projected number while selling 10 widgets below your original cost. Your price points may be affected by coupons, seasonality, the economy, the competition, or any number of other circumstances. Look at the bigger picture. Be prepared to negotiate to make the sale and do not be so stubborn as to turn away business because you MUST sell the product at $145 to make your margins.

Tags: dealerships, Go Mini’s, Mobile storage, mobile storage containers, Moving and Storage, portable storage, portable storage containers, portable storage units, storage containers

This entry was posted on Wednesday, May 26th, 2010 at 7:00 pm and is filed under Latest news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.