How Many More Sales Dollars Do You Need To Cover An Expense? | HVAC Pricing Series Part 14
Another Math Formula:
Expense $’s ¸ Profit % = Increased Sales $’s to Cover Expense
You are considering adding a secretary to your business.
Secretary Salary plus Incidentals/Taxes = $30,000
Net Profit = 5% (.05)
$30,000 ¸ .05 = $600,000 in Increased Sales
You can use this formula for any expense (Cost) you are considering adding to your company: a new truck, a new piece of equipment, a new employee. Also, note that the sales dollars needed to cover an expense (Cost) go down as your Profit percentage increases (that same $30,000 secretary only requires $300,000 in increased sales at 10% Profit). This is another great reason to raise your prices and increase your Profit.
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