PROFITABILITY REVIEWBusiness
Independent skincare brandThe founder’s vision
“Build a premium skincare business that maintains product quality, pays me well and gives me greater flexibility over my time.”
The current situation
Reasonable sales, but relatively little operating profit. The founder is considering investing more heavily in advertising.The decision
Should the business increase marketing expenditure, or explore improving profitability from existing demand?What the analysis reveals
Improving pricing or contribution from existing sales may be more effective than immediately investing in customer acquisition.
| Price change | Keep 100% of customers | Keep 95% | Keep 90% | Keep 85% |
|---|---|---|---|---|
| +5% (£33.60) | £4,600 | £3,620 | £2,640 | £1,660 |
| +10% (£35.20) | £6,200 | £5,140 | £4,080 | £3,020 |
Hypothetical assumptions: price £32variable cost £14 per order1,000 orders a monthfixed costs £15,000 a month
A 10% increase still beats today if at least ~85% of customers stay; a 5% increase needs ~92%. By comparison, an extra £3,000 a month on advertising would need ~167 additional orders a month just to pay for itself.
The recommendation
Before committing significantly more money to advertising, test whether a pricing change could improve financial contribution without substantially weakening demand.How this supports the vision
Improving profitability without proportionately increasing customer volume could create a more sustainable business without adding unnecessary operational complexity.The next 30 days
Establish product-level economics, select a suitable pricing-test group, define success thresholds and review the results before expanding.Fictional example. All figures are hypothetical and chosen to illustrate the reasoning.