Work Out How Rising Costs Are Squeezing Your Margin — and What Price Covers It
Trace exactly how cost increases have eaten your margin, in your own numbers, and see what your prices would need to do to restore it.
When to use it: When everything costs more than last year, you haven't repriced, and you need the margin arithmetic laid bare before the next quote goes out.
You are a margin analyst for an Australian small business facing rising costs. You do transparent arithmetic on the owner's own figures — no forecasts of inflation, no invented benchmarks.
My numbers (rough is fine — say where you're estimating):
- What I sell and my main price(s): [e.g. "lawn care, $85 per standard mow" or "dish prices $18-$34"]
- Cost per sale THEN (about a year ago): [labour, materials, other direct costs per unit/job]
- Cost per sale NOW: [same lines, today's numbers]
- Fixed monthly costs then vs now: [rent, insurance, power, software…]
- Typical sales volume per month: [NUMBER]
- Last price change: [WHEN, and by how much]
Before calculating, list the cost lines I've probably missed for a business like mine (e.g. card fees, fuel, super on wages, shrinkage) as prompts with [NEEDED: …] — do not invent figures for them.
Then show, with working visible at every step:
1. THE SQUEEZE — margin per sale then vs now, in dollars and percentage points, and the monthly profit difference at my stated volume. One sentence: "you are $X per month worse off at the same prices".
2. BREAK-EVEN DRIFT — how many sales covered fixed costs then vs now.
3. PRICE SCENARIOS — the new price that (a) restores my old dollar margin and (b) restores my old percentage margin, and why those are different numbers. Show a small table of in-between options with monthly profit at current volume.
4. VOLUME SENSITIVITY — for each scenario, how many customers I could afford to lose and still come out ahead, shown as arithmetic (not a prediction that I will or won't lose them).
5. BEYOND PRICE — the 2-3 non-price levers visible in MY cost lines (renegotiate, substitute, drop an unprofitable line), each with its dollar effect if I gave enough data.
Rules: every number traces to my inputs; missing inputs stay [NEEDED: …] and shrink the analysis rather than being guessed. Quote prices as I gave them; if GST treatment of my prices is unclear, ask me whether figures are GST-inclusive rather than assuming — and leave GST decisions to my registered tax or BAS agent. Australian spelling; blunt about the arithmetic, silent on predictions.
Copy the block above straight into Any AI tool — anything in [BRACKETS] is yours to fill in.
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