You can greatly improve your cash flow by adopting a policy of smaller, more frequent price increases instead of waiting for a year or longer before raising prices a larger increment.
Use this simple example to catch my drift:
Chicken tenders $5.99 from January 2008 - January 2009
Price raised to $6.99 after January 2009
4000 orders of chicken tender sold during whole year
$23,960 in sales for year
Chicken tenders $5.99 from January 2008 - March 2008
Chicken tenders $6.29 from April 2008 - July 2008
Chicken tenders $6.49 from August 2008 - October 2008
Chicken tenders $6.79 from November 2008 - January 2009
Price raised to $6.99 after January 2009
4000 order chicken tender sold during whole year, 1000 order per quarter
$25,569 in sales for year
By not waiting to raise the price, you gain an additional $1,609 in profit for the year off one menu item. You also help mask the price increase by doing it incrementally. Your customers are much less likely to notice $.20-$.25 increases compare to a $1 increase.
2 responses so far ↓
1 Jerry // Dec 15, 2008 at 10:08 pm
Is that $1609 profit or an increase in revenue?
2 admin // Dec 16, 2008 at 6:35 am
It’s both, assuming you are already at a breakeven or better.
There are no additional expenses in the second scenario, so every additional dollar goes to profit.
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