Reduced Profit Margin
Posted: Tue Jan 28, 2025 5:36 am
When you play with prices, the first thing that will be affected is your profit margin .
This situation is very dangerous for your business.
Imagine this: you sell products at a cheap price because you want to attract customers.
For example, before you sold clothes for RM100, you made a profit of RM30.
But what happens when you decide to lower the price to RM80? Your profit goes from RM30 to just RM10!
It may seem like you're still making a profit, but the reality is, your business costs never change.
Marketing costs are still going on as usual – your FB ads, influencers, website all still have to be paid for.
This doesn't even include operating costs - paying staff, renting a shop or warehouse, shipping costs, and so on.
All those things don't go down in price like you go down in product prices.
And don't forget, you have to spend capital to stock up on products!
When profit margins get thinner, you will struggle to cover all these costs.
In the long run, your cash flow will be completely torn apart.
If cash flow is disrupted, it is difficult to run a business czech republic phone data because you don't have the money to roll it out.
Not only are operations affected, but when it comes to making other business decisions, you are limited because you don't have enough capital.
And remember, a business that constantly plays with prices may seem to get a lot of sales, but it doesn't make any profit .
You have to sell more products to achieve the same profit target.
By working harder but getting little profit, you can eventually burn out yourself!
So, instead of falling into this price trap, it's better to focus on the quality of the product and the added value you can provide to your customers.
This way, your profit margin will be safer, and your cash flow will also be maintained steady.
This situation is very dangerous for your business.
Imagine this: you sell products at a cheap price because you want to attract customers.
For example, before you sold clothes for RM100, you made a profit of RM30.
But what happens when you decide to lower the price to RM80? Your profit goes from RM30 to just RM10!
It may seem like you're still making a profit, but the reality is, your business costs never change.
Marketing costs are still going on as usual – your FB ads, influencers, website all still have to be paid for.
This doesn't even include operating costs - paying staff, renting a shop or warehouse, shipping costs, and so on.
All those things don't go down in price like you go down in product prices.
And don't forget, you have to spend capital to stock up on products!
When profit margins get thinner, you will struggle to cover all these costs.
In the long run, your cash flow will be completely torn apart.
If cash flow is disrupted, it is difficult to run a business czech republic phone data because you don't have the money to roll it out.
Not only are operations affected, but when it comes to making other business decisions, you are limited because you don't have enough capital.
And remember, a business that constantly plays with prices may seem to get a lot of sales, but it doesn't make any profit .
You have to sell more products to achieve the same profit target.
By working harder but getting little profit, you can eventually burn out yourself!
So, instead of falling into this price trap, it's better to focus on the quality of the product and the added value you can provide to your customers.
This way, your profit margin will be safer, and your cash flow will also be maintained steady.