Smb Price Check

Price Check

When to use

Run this before the owner raises prices, launches a product, or reacts to a cost increase. It turns "should I change my prices?" into a numbers-backed decision the owner makes.

Not for: deep unit-economics with break-even modeling (use smb-margin-analyzer); publishing or updating prices in any system — the owner signs off before anything changes.

Method

1. Gather inputs. Each product's price, unit cost, and recent units sold. Pull from connected sales/inventory data, or ask the owner for the short list that matters.
2. Compute and rank. Per-product gross margin (dollars and percent); rank by margin and by volume.
3. Flag outliers. Items below a healthy margin floor, loss leaders, and high-volume low-margin items where a small change moves the most money. Decision point: prioritize the high-volume low-margin items — that's where a 5% tweak has the biggest dollar impact.
4. Build three scenario views over the same products: Hold (current prices/margin); Raise (across-the-board or targeted increase, with estimated margin gain and a demand-sensitivity caveat); Reprice losers (fix only the worst margins, leave winners untouched).
5. Summarize trade-offs and recommend. Name a recommended scenario and the assumption it rests on. The owner approves before any price changes anywhere.

Example

Three products: Mug $12/cost $5/300u; Tee $22/cost $14/180u; Sticker $4/cost $1.20/90u. Margins: Mug 58%, Tee 36%, Sticker 70%. Tee is high-volume low-margin — the lever. Hold: total margin $4,164/mo. Raise Tee to $25: +$540/mo, caveat "demand may soften above $24." Reprice losers: lift Tee to $25 only, leave Mug/Sticker. Recommendation: reprice losers — biggest gain, least risk to bestsellers. Assumption: Tee volume holds within ~10%.

Pitfalls

• Ranking only by margin % and missing that the low-% product is where the real dollars move.
• Modeling a raise with no demand-sensitivity caveat, so the projection reads as a guarantee.
• Touching bestsellers "for consistency" when repricing only the losers is safer.
• Publishing a price to a live storefront before the owner has signed off.

Output format

• Margin table: product | price | cost | margin $ | margin % | units | margin contribution.
• Three scenario cards: Hold / Raise / Reprice losers — each with projected total margin and a one-line trade-off.
• Recommendation + the assumption it rests on.
• Approval note: no price is published or updated in any system without owner sign-off.

Reference

Margin math (get the definitions right before ranking)

• Gross margin $ = price − unit cost. Gross margin % = (price − cost) / price.
• Markup ≠ margin. A 50% markup on a $10 cost = $15 price = only 33% margin. Owners conflate these constantly; always state which you mean.
• Contribution = margin $ × units. This is the number that pays the rent. A 36% item selling 180 units contributes more dollars than a 70% item selling 20.
• Blended margin across the catalog matters for the P&L; per-item margin matters for the pricing decision.

Healthy gross-margin benchmarks by category

Elasticity rules of thumb

• Necessities and habitual buys (coffee, essentials, subscriptions under ~$15) are inelastic — a 5-10% raise rarely dents volume.
• Discretionary and comparison-shopped goods (apparel, gifts, electronics) are elastic — small raises can move volume noticeably.
• The 1% rule: for a typical SMB, a 1% price increase with volume held flat lifts operating profit far more than a 1% volume increase — price is the strongest profit lever.
• Break-even volume drop for a raise: you can afford to lose price-increase% / (margin% + price-increase%) of units before the raise loses money. Example: 10% raise on a 40% margin item breaks even at ~20% unit loss — so unless demand is very elastic, the raise wins.
• Anchor and charm pricing: $99 vs $100 rarely changes SMB volume much; a clearly-communicated value story beats a penny trick.

Pricing-scenario table (the three views, side by side)

Cost-increase response playbook

When a supplier cost jumps: (1) recompute margin at the new cost, (2) check if the item is still above its floor — if yes, absorbing may protect volume; if no, pass through, (3) prefer a targeted raise on the affected item over a blanket increase, (4) if raising a visible staple, pair it with a value message rather than a silent bump.

Do-not-touch guardrails

• Never publish or push a price to a live storefront, POS, or invoice template without explicit owner sign-off.
• Never model a raise as a guarantee — every raise line carries a demand-sensitivity caveat.
• Leave bestsellers alone unless the data says otherwise; "consistency" is not a pricing reason.