Archive: Jan 2015
Comments Off on Welcome to our newest part time Finance Director
With more and more businesses in Devon seeking part time Finance Director support, SouthWestfd has taken on additional expertise in the form of Richard Colling to cope with the increase in demand.
Richard is an Associate of the Chartered Institute of Management Accountants and has worked in a number of senior roles over 25 years, mainly in the construction, property services and facilities management industries.
He applies his breadth of experience in an energetic and collaborative manner right across a business – to owners, employees and their clients alike. Richard has strong leadership skills both within finance and the wider business delivering sound advice with objective decision-making based on effective analysis. He applies his keen commercial awareness with a pragmatic and persuasive approach to resolving issues, restructuring teams, introducing robust processes and improving efficiencies.
Richard has managed banking relationships; organised corporate restructurings, including acquisitions integration; delivered cost-saving measures; introduced new accounting systems and processes; improved budgeting and management reporting; undertaken tax compliance, and handled defined benefit pension arrangements.
Comments Off on How a 2% increase in price can yield a 20% profit increase
Blog by Peter Macklin, Finance Director, SouthWestfd
A company’s pricing strategy is one of the key elements in determining how successful and profitable that company will be. In simple terms there are three main approaches:
- Cost-based: adding a profit element to the costs of purchasing or producing that product
- Customer-based: taking a view on what the customer is prepared to pay
- Competitor-based: where competitor prices are the main influence on the price
In reality most companies will adopt a mixture of all three approaches. What must never be overlooked though is the impact that a small increase in prices can have. If we have a company which is making a 40% gross margin and a 10% net margin on a turnover of £1,000,000 then its results will be:
Gross profit £400,000
Net profit £100,000
If that company can increase its prices by just 2% then the turnover will go up by £20,000 to £1,020,000 and the net profit will go up by the same amount to £120,000. In other words a 2% increase in prices has given rise to a 20% increase in net profit!
If on the other hand that same company sells 2% more product but keep prices the same, then if you work through the figures you will see that its net profit goes up to only £108,000, an increase of 8%. In terms of its effect on net profit, you would need to sell 5% more product in order to have the same effect as a 2% price increase!
In my experience many companies focus on selling more product and don’t concentrate enough on ensuring that small price increases are put into effect wherever possible. Why not review your price list today and see if there is anything you can do?