You’ve probably been in the gun business for a long time. Or at least have been around firearms for a long time. You know about different products, you know the types of customers you sell to, and you know how to run your gun shop store. But you may not be aware of this trick to make more money. And in some ways it’s the oldest trick in the book.
What’s the secret to making more? Raise Prices!
That seems ridiculous, right? It’s a competitive place out there. There are lots of sellers on GunBroker.com and there is competition from the big boy retailers. You still gotta put food on the table, and raising prices will put you out of business, right?
Not necessarily. Charging more for a gun equals more profit per gun. If you normally charge $500 for a gun, and raise your price to $525, that’s $25 additional bucks you put in your pocket. Multiply that by a hundred guns and that’s an additional $2500. Multiply it by a thousand and that’s an additional $25,000. That’s real money.
But, people want a deal. They’ll buy the cheaper gun out there, right? Again, not necessarily. We typically see orders go like the chart below. You’d think people buy the cheapest gun. But that isn’t usually the case. It’s surprising how many will pay more. (this chart to the right is showing the gun only, no extras included.) You can see the pricing breakout for any model here.
At the end of the day, the money you keep in your pocket is what matters. Profit is more important than revenue.
There’s a formula you can use to help you in making pricing decisions. First, a review of a few key terms:
- Revenue: Unit Price x Units Sold
- Cost: Unit Cost x Units Sold
- Profit: Revenue – Cost
- Margin: Profit ($) divided by Revenue ($)
If your current Margin is 20% for example (i.e. 20% of the money you made, you get to keep), you could increase prices 10%, and sales could DECLINE 33% without changing your current profits.
So let’s look at an example:
See how we raised the price, and the units purchased and revenues decreased, but the profit stayed the same, because the amount you charged was higher. If the units bought decrease any less than 33%, that becomes extra money in your pocket. If, for example, units purchased decreased by only 10%, that would be $13,500, an additional $3500 of profit at the end of the day.
We’ve included a spreadsheet calculator (CLICK HERE TO DOWNLOAD) to help you make pricing decisions and hopefully help you make more money. Feel free to play with it and see how it works.