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*Personal Branding Accelerator* Internet Lead Generation Coach*Digital Printing* Graphic Business* Out of Home wide format Printing* Billboard Banner* Brokerage* E Marketing* Western Eastern Europe* Middle East Africa* Corporate Account management* Sales Coaching* Brand Coaching*Negotiation skills.*Help software companies globalize their solutions

Lucien Moons Business Accelerator current mission with Scitexvision-NUR-Colorspan (Now a HP company since Nov 2005) is to market High Volume large format digital printers and help accelerate the analogue to digital revolution for silk screen, offset and packaging companies in Central Eastern Countries. (Pol, CZ SK HU RO SLO Cro BH Ser Mace Bulg.)

Monday, March 29, 2010

Recently, a client asked me whether it would be a good idea to lower prices in order to generate more sales

Solving the Price Puzzle

By David Dodd on March 14th, 2010
Recently, a client asked me whether it would be a good idea to lower prices in order to generate more sales.  I suspect that many printers have thought about the same question more than once.
Decisions about increasing or reducing prices are inevitably complex and difficult to make unless, of course, your prices are very low or very high relative to others in your market.  It’s tough to pull the trigger on a price change because of the inherent uncertainty about what the financial impact of the change will be.  If I lower prices, will I generate enough new sales to increase my profits?  If I raise prices, will I lose so much business that my profits will be harmed rather than helped?
These questions are extremely difficult to answer.  In fact, to answer them accurately, you have to know what the “elasticity of demand” is for your company’s products and services.  And unfortunately, your company’s elasticity of demand isn’t something you can find in your local library or look up on the Internet.
The good news is that there is a simple calculation that can help owners and managers make more rational decisions about price changes.  The calculation is simple because it doesn’t try to predict what will happen if you raise or lower prices.  Instead, this calculation describes what must happen for a price change to be profitable.
Specifically, this calculation can answer two questions:
  • How much would I need to increase sales volume in order to profit from a specified price reduction?
  • How much could my sales volume go down before a specified price increase becomes unprofitable?
The measure of “profit” used in this calculation is contribution margin (sales minus variable costs).  This calculation can be used to evaluate across-the-board price changes and price changes that apply to major segments of your business.  It cannot be used for individual jobs.
The calculation uses the actual contribution margin (expressed as a percentage of sales) generated during a base period (usually a year).  When you reduce selling prices, the contribution margin goes down, and new sales volume must make up for that decline before profits will be improved.  On the flip side, your contribution margin goes up when you increase prices, and you can afford to lose some sales volume before profits are impaired.  This calculation will tell you where those “breakeven points” are.
The formula is:  -(Price Change) / (Contribution Margin + Price Change)
To give a simple example, suppose that your contribution margin during the base period was 80% and that you are considering a 10% price reduction.  How much will your sales volume need to increase for the price reduction to be profitable?  The answer is 14.3%, calculated as follows:
Breakeven Sales Volume Increase = -(-10%) / (80% + (-10%))                            
Breakeven Sales Volume Increase = 10% / 70%
Breakeven Sales Volume Increase = 14.3%
If your company had sales of $5 million during the base period, you would need to increase sales by more than $714,286 for the 10% price reduction to be profitable.
I’ve created a simple Excel worksheet to calculate these breakeven points.  If you’d like a copy, e-mail me directly at lucien@lucienmoons.be

Saturday, March 27, 2010

Do You Know Your Z Score? You Should!


With the reduced turn over you experience 

to day, this tool can help, looking in your
business future and take actions TODAY,
to have a FITTER business.

Lucien Moons 

International Business Accelerator Expert.

By David Dodd on March 25th, 2010

It’s no secret that the past 12 to 24 months have been especially difficult for many printing companies. Dr. Joe Webb is estimating that the printing industry lost 2,844 firms in 2009. Bankruptcies, foreclosure auctions, and other closures have been well documented in the press as well as by other trade publications.

Having a clear picture of your company’s financial health is always important, but it becomes essential when business conditions are difficult and the margin for error is reduced. And while no single tool or formula provides a complete picture of financial health, one popular measure is known as the Z Score.

The Z Score was developed in 1968 by Edward Altman, a financial economist and professor at NYU. The original objective was to provide a way to assess creditworthiness. Since that time, the Z Score has become a popular method of analyzing a company’s financial health and estimating the short-term risk of bankruptcy.

The Z Score isn’t perfect, but when it was initially tested, it was found to be 72% accurate in predicting bankruptcy within two years. Subsequent testing found that the Z Score was 80%-90% accurate in predicting bankruptcy within one year.

The Z Score combines five common financial ratios. Each of these ratios is multiplied by a weighting factor developed by Professor Altman. The values obtained are then added together to determine the Z Score.

The specific ratios and weighting factors for privately-held manufacturing firms are shown below:

* (Working Capital / Total Assets) X 0.717
* (Retained Earnings / Total Assets) X 0.847
* (EBIT / Total Assets) X 3.107
* (Book Value of Equity / Total Liabilities) X 0.420
* (Net Sales / Total Assets) X 0.998

A Z Score of above 2.90 indicates that bankruptcy is not likely. A score that is lower than 1.23 indicates that bankruptcy is a strong possibility.

Your Z Score should be calculated on a quarterly basis as one part of a comprehensive review of your company’s financial performance. This quarterly financial health “check-up” needs to become a standard component of your management routine. As I noted earlier, when times are tough and the margin of error is small, it’s more important than ever to monitor the financial health of your company in a thorough way, on a regular basis.

If you don’t have the time or resources in-house to perform this kind of financial review, you should consider getting assistance. It doesn’t have to be costly or disruptive, and with online collaboration tools, it can usually be handled remotely.

I’ve created an Excel-based Z Score Calculator. If you’d like a copy of this worksheet, e-mail me directly at ddodd(at)pointbalance(dot)com.
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Thursday, March 25, 2010

"Go for the moon. If you don't get it, you'll still be heading for a star."

Tuesday, March 23, 2010

We only get one life, and the urgency of getting on with what we’re meant to do increases every day

Sunday, March 21, 2010

Wednesday, March 17, 2010

Monday, March 15, 2010

“When you do nothing, you feel overwhelmed and powerless. But when you get involved, you feel the sense of hope and accomplishment that comes from knowing you are working to make things better.”

Friday, March 05, 2010

Wednesday, March 03, 2010

"Character is the result of two things: mental attitude and the way we spend our time"