June 5, 2014
Led by Jason Kraus, senior manager of aftermarket transportation at Meritor, the 45-minute webinar showed aftermarket distributors and suppliers the overwhelming financial benefits that can be reached through miniscule (1 percent) changes. Kraus talked specifically about four factors of profit where a 1 percent changes can make a big difference: pricing of goods, quantity of goods sold, cost of goods sold and expenses to run your business.
Using the example of a distributor purchasing 10,000 units of a product for $7.50 and selling it for $10, Kraus was able to showcase the significant gross margin and net profit opportunities.
According to his presentation, Kraus noted a 1 percent drop in price, coupled with a 1 percent increase in the quantity of goods sold, a 1 percent drop in the cost of goods sold and a 1 percent drop in operating expenses can improve a distributors gross margin by 8.1 percent and its net profit by 74.6 percent.
Kraus also discussed the risks associated with price slashing through sales, and noted a 1 percent drop in price requires an additional 4.2 percent of total sales to break even, while a 10 percent drop in price requires a 66.7 percent increase in total sales to break even.
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