The impact of Pricing.
Would you rather increase prices by 4% or fire 50% of the team?
This third article on the topic of Inflation and Pricing is part of the graduate class I teach at NYU (New York University), the How to Make Money, and the Global, Profitable & Ethical series. The article is interactive. You will be able to respond to questions, see responses in real-time from others and share your comments with a community of company executives, managers, business owners, and students.
Imagine the sales of your company are 100. Thousands, millions, billions, whatever you like. If it’s a small company, imagine $100,000. If it’s a global multinational, imagine $100 Billion. The firm has financial trouble, and they have asked you to increase profitability by 4%.
The Selling, General, and administrative expenses, including payroll, rent, and other expenses, are about 16% of sales. It varies by company. At McDonald’s, it’s 23% and at Apple 6%. On average is 16%. Out of that, payroll is one-half of 16% or 8%.
To increase profitability by 4%, would you fire ½ of the entire team or increase prices by 4%? The financial impact is the same.
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In the classes I teach, there are no right or wrong answers. The target is for students to learn how to justify their responses. Go ahead and vote on the link below and add your comments on your rationale on the separate link. You can add your real name or remain anonymous and delete the data at any time.
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Next, we are going to learn tips on how to increase prices. Follow me to get my content.