Quote:
Originally Posted by CamaroSpike23
but at what point does the decision get made to sell fewer quantities of a product at a higher price vs selling larger quantities at a lower price?
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This is a slippery slope. For instance to sell more headers means you have to buy more benders (see what one of those costs), hire more employees, pay more taxes, and so forth. There are other things like most of the header companies I know are always struggling to hire enough welders because there are only so many skilled ones.
And some things are inflexible and not subject to scales of ecomony. For instance, doubling business will not make your cost of labor do down. A header will still take the same time to weld, and the welder will make the same money per hour. The price of stainless steel is inflexible. Additionally, we have a government system that tightens regulations, and removes incentives as a business becomes bigger.
It becomes a game of deminishing returns. Think of it this way. Imagine you own a business, and someone told you they had a plan to double sales. However to double sales, you had to cut your profit margin in half, double your manufactuering staffing, invest $250K in machinery, and find a bigger building. Suddenly double sales becomes a loss.
Lastly throw in that this is a market largely governed by discretionary spending. I know every time gas goes up, or the government threatens to shut down, our sales go down with it. When you add a lot of overhead, that hurts your ability to rightsize to meet demand.