Do You Know Your Minimum Selling Price

Experience has shown no matter where you set your minimum selling price, a sales representative sooner or later will ask you to lower it. The question is not whether you will be asked permission to discount; the question is when should you say yes.

One of the best examples of this is highlighted in an excellent article “Making Sales and Losing Money” by Brian Jeffrey. The article highlights a case where a sales rep, after obtaining his largest order to date, actually loses money on the sale. Not only does Brian discuss how this could easily happen, he also discusses excellent ideas on how you can prevent it from happening to you. You can read the article at http://ow.ly/27HXi.

Your company’s fixed costs must be paid whether you make the sale or not. Therefore, any time a discounted selling price contributes at least one dollar towards paying your fixed costs, it is considered profitable. As long as all of your variable costs are covered, including the cost of the goods sold plus any variable sales commissions, the discounted price can be accepted.

The Minimum Selling Price Calculation Worksheet available for sale in our eStore at http://www.b2bsalesconnections.com/store.php#automated_tools will automatically calculate a product’s minimum selling price to contribute at least one dollar towards the payment of fixed costs, given the cost of goods sold and the commissions to be paid on the sale.

As most managers would agree that making a sale for only a dollar is hardly worth the effort, the spreadsheet also shows how much gross profit is being made if you sell the product at a certain price.

Aim Higher!