Shanli Liu, CPA, CTPFreedomfolio · I help 7 to 8 figure service business owners and ecommerce sellers keep 10K to 75K of profit- without IRS headaches | CPA. Virtual CFO. Tax Resolution Pro | $5MM+client tax savings | Book a free 15 min strategy call

Inflation Is Destroying Your Profit...

Name: Inflation Is Destroying Your Profit...
Uploaded: 2024-08-19T01:30:01+00:00
Duration: 57 s
Channel: Shanli Liu, CPA, CTP
Description: In this concise presentation, the speaker explains how inflation erodes business profit margins when prices are not adjusted. Using a 2017 baseline where…

19 Aug 2024 · 1 min

Watch on YouTube

0:57

In this concise presentation, the speaker explains how inflation erodes business profit margins when prices are not adjusted. Using a 2017 baseline where a product sold for $100 with a 20% margin, the speaker shows that by 2024 the same $100 price would have the purchasing power of $79, effectively wiping out the profit if costs have risen 20%. The core message is that failing to raise prices each year compounds the inflationary pressure, and businesses should implement regular price increases of roughly 3–6% annually to stay ahead of inflation and preserve margins.

Chapters

In 2017, if you sold something for $100, that was your only product, and you were running 20% margins as a business, if you did not change your price from 2017 until 2024, that $100 now means that your costs in that business have gone up by 20%, which means that your profit is now zero. And so if you feel like your margins continue to compress year after year after year, it's usually because you're not appropriately adjusting your prices. So to give you context, $79 in 2017 is the equivalent of $100 today. And so that would be like you going back in time where you had a 20% margin business and running it at a $79 price point rather than a $100 price point. And so you just like that eliminate all the profit in the business. And so you have to do the reverse of that because inflation is a compounding threat to your business that every year stacks on top of itself. And so if you're not making 3, 6% increases in prices at least annually, you're not even keeping up with inflation.