Real-Life Math
You've always offered a fair price for your repair services and products. Your customers know your shop, Sole Man Shoe Repair, offers good value.
You want to move your shop into a bigger space. Your rent will jump from $600 a month to $800 a month. Your other various overhead expenses will remain at $300 a month.
To raise extra revenue, you plan to increase all your prices. Your customers are loyal, so you don't think a price increase will hurt sales.
On average, 20 percent of what you charge for repairs goes toward the cost of materials. The rest goes to you. After you raise your prices, 15 percent of what you charge will be for materials.
You have a 30 percent markup on laces, belts, boots, polish, and other leather care accessories you sell. You're going to increase the markup to 40 percent.
You do $3,200 worth of repairs every month. You sell $1,700 worth of products every month.
- How much do you make from repairs and product sales every month? What is your monthly profit after expenses?
- How much will you make from repairs and product sales every month after the price increase and move? What will be your monthly profit after expenses?