Profit Margin - Mark SelbstDo this Thing…
Do this One Thing…

Allow others to Do this One Thing and you will Guarantee yourself

Much Pain that you could Do WITHOUT.

I beg of you to ensure that your people, the ones dealing with the customers on the phones quoting and estimating don’t start or continue to cut or trim or discount on price. One in every three conversations I have always mentions that front of house is not quoting correctly or chipping profit of the quote or estimates… this is no time to allow anyone to be sloppy or stupid and one could argue and I will – that it’s probably more important than ever to be accurate and profitable. 

Some folks within your business will be shell shocked right now with all that’s going on and they could in a deliberate and intentional way think that to get and keep car count coming in the door they have to discount just to get the work. This is what I call Price Buying Salespeople who project their feelings onto their customers. This is not as uncommon as you may think! Projection is the key word here… it’s the word psychologists use to communicate the idea that people transfer their ideas, feelings, and emotions onto others. This is why being totally anchored as a business leader is so important right now. 

Salespeople, your people are the ones who say “Mate, I’m just like everyone else, I eat, drink and drive a car and I buy on price. Therefore, our customers buy on price.” But unfortunately, that’s faulty and dumb logic. Just because you buy on price doesn’t mean that your customers buy on price, any more than just because you like buying blue cars, means that I like buying blue cars. I don’t, I like white cars and you may not. Projection! All customers look like price buyers. Why? Well, all buyers look like price – buyers to a price – buying salesperson! 

A price buying salesperson will tell customers to buy elsewhere, you can get it cheaper elsewhere. This actually happened to me at JB HiFi six weeks ago before this sh!t storm started. I went into the store and asked for a phone splitter for my modem and the sale guy says ‘hey they’re cheaper at Bunnings’… Wow! I thought imagine owning this store and having the head of the sales prevention team working for you? This crap is going on everywhere! 

I’m NOT saying to do this… But it is extremely instructional: For example, if you currently have a 40% gross margin, and you are considering a 10% price increase, you can sell 20% less and you will still have the same total gross profit dollars in the end. If you are wondering? YES… This is taking off from where the March R.A.B.S.M.G. Newsletter left off – Page 7 Money Math For Your Automotive Business for your reference. Not nearly enough people are working on this period. 

The Bird Brain Idea that somehow, We Can Make It Up in Volume. Here is the thing, when any business gets into a tight spot financially, it is because some genius – often the smartest guy in the room – gets a bright idea that one can cut or shave price and make it up in volume to at least look “competitive”. 

Right now, none of this should be on the menu; no shaving, no slippage, no discounting, no sloth, what should be on menu though is the word like “Eke” you must without fail! Eke – out profit and margin on every sale. Please ensure you have meetings with your salespeople/team every morning to ensure they understand that they must eke out survival money. “Revenue is for your Vanity; Profit is for your Sanity/Survival.” 

Increase Prices - Gross Profit Dollars - Mark Selbst

How to find Gross Profit,
without a Price Decrease and total unit sales 

 

If you decrease your prices (a discount, cut, shave price for example), how many more units do you have to sell to keep gross profit dollars the same? What if you’re lowering prices to increase sales? We’ve calculated the impact of a price decrease on profit in the Excel spreadsheet illustration below. 

Find the gross margin of your product or service in the left column, then find the column that shows your price decrease. Where the two numbers intersect is a number that shows how many more you must sell as a result of a price decrease to maintain the same gross profit dollars

<p%EFor example, if you have a 35% margin, and you are considering a 10% price decrease, you must have a whopping 40% increase in unit sales to end up with the same total gross profit dollars. This is important to know if you are considering a sale in an attempt to increase unit sales of a product or service, especially if it has a low gross margin to begin with. 

Decrease Prices - Gross Profit Dollars - Mark Selbst

Folks as you can clearly see, no time is a Good time to tinker/discount. If you have a razor thin 30% gross margin and you drop your prices 20%, you must triple (X 3) your unit sales (i.e., increase 200%) to have the same gross profit dollars. Keep this in mind and show your staff what happens if you’re lowering prices. 

Lastly, DO NOT stop marketing! 

Please ensure that you are “Thanking Everyone” for supporting your business, your staff… Cut a short video and stick up on Facebook! 

Maybe run a Promotion!
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Take Care
Mark Selbst