Shop price rise: 3 figures to check before you start

Key takeaways

• Subtract the old price from the new price.
• Estimate sales at their current level and at a lower level.
• Calculate the increase from the higher price; assess lost sales separately.
• Check every price record, label and sales slip after the change.

A price rise looks simple on paper. You change one number, print a new label and carry on. But a rise of $0.50 touches every sale of that item, and a wrong entry in the till can go unnoticed until someone checks the sales. Those numbers tell you whether the rise is worth making, and they give you something to compare against once the new price is live.

The three figures work together. The first tells you how much more each sale brings in. The second tells you how many of those sales you expect. The third multiplies them, so you see the total effect in one number. Leave out any one of them and the decision gets harder. A price change with no sales estimate says nothing about money, and a sales estimate with no price change says nothing about margin.

The steps below follow the order you would work in, from a note on paper to a check after the change. The textbook example uses a coffee shop, but the method works for any shop that sells items at a fixed unit price. It needs only a pen or a spreadsheet and some sales history. The figures in this post are examples, so replace them with your own.

1. Write down the old price and the new price

Start with one note for each item you plan to change. Write the current selling price exactly as your till shows it, then write the new price you want to charge. Subtract the old price from the new one. The result is your first figure, the price change for each unit. If you are raising an item by $0.50, this figure should read $0.50. If it reads anything else, check the new price before you go on. Keep the old price in your note as well. You will need both numbers in step six, when you compare what you expected with what happened, and a note that holds only the new price makes that comparison harder.

Next, find where the price is stored. Some systems keep prices in separate records rather than on the item itself. The ERPNext documentation describes its Item Price record as "the record in which you can log the selling and buying rate of an item." Your till may use other names, such as price book, product price or menu price, but the idea is the same. The price on the screen comes from a stored record, and that record is what you need to change.

Check whether the same item has more than one price record. The same Frappe page explains that if an item's selling prices change based on territory or other criteria, you can create multiple selling price lists for it. A shop can end up in the same position without calling it that. You might charge a different price for takeaway than for eat-in, for a catering order, or on a second till. List every price record that touches the item before you change anything, so you do not update one and leave the rest at the old price.

Write each record's name next to the item in your note. When you reach step five, you will work from that list rather than from memory, and you will know exactly which places to check.

Think about the places a price appears that are not in the till at all. A printed menu, a sticker on a shelf or a handwritten card on a counter all show a price. Add them to your list. A customer who sees one figure on the wall and another on the screen will ask about it, and that question is much easier to answer when you already know where every price is written down. If you print shelf stickers, review your barcode label settings before changing them.

2. Compare the new price with nearby shops

A rise is easier to justify when you know where your price sits against the shops your customers can also visit. Take a short survey. Pick the same item, or the closest comparable one, at three or four nearby shops, and write down their prices with the date you checked. Prices move, so a note without a date is hard to rely on later. If a shop's price depends on size, a combo or a membership, record that too, so you compare like with like.

If you cannot find a comparable item at all, say so in your note and lean more heavily on your sales history. A survey of the wrong product is worse than no survey, because it can make a poor rise look justified.

The OpenStax textbook example uses this kind of survey. The owner of a coffee shop has an employee check the other coffee shops in the area, and the survey finds that they are charging $0.75 more for espresso drinks. In that example the rise under study is $0.50, which is less than the gap the survey found. That gap does not prove the new price is right for your shop, but it gives you a reference point that is more useful than a guess.

Use the survey as a range rather than a target. If nearby shops charge more than you, a rise may fit comfortably. If they charge less, a rise may push some customers to go elsewhere. Either way, write the result beside your price change, because it affects the sales estimate you make in the next step.

Keep the survey honest. Do not compare your everyday price with a competitor's promotional price unless you note that the promotion is temporary. A short, dated list that you can repeat next month is worth more than a long list you only make once. If you can, check prices on more than one visit, so you are not relying on a single snapshot.

3. Estimate how many units you will sell

The second figure is the number of units you expect to sell at the new price. Start with your sales history. Pull the number of units sold for the item over a typical period, such as a week or a month, using whatever report your till system gives you. If you do not have a report, count from sales slips over a short sample period and scale the result up with care. If you sample sales slips, pick days across the week rather than a single day, and include a quiet period and a busy one, so the sample reflects normal trade rather than one unusual day. Write the figure down with the period it covers, because a monthly number and a weekly number cannot be compared directly.

Then write two estimates. The first assumes sales stay at the level you have seen. The second assumes some customers stop buying the item at the higher price. You are not predicting the future with either number. You are setting a range that you can test against real sales in step six.

Write each estimate as a plain number with a short reason beside it. A reason such as steady regulars, or a new office opening nearby, helps you judge the estimate later, when you know what actually happened. Estimates without reasons are hard to learn from.

The OpenStax example uses one estimate of 1,500 units, and it treats the price as the only thing that changes. In its words, "the only variable that has changed is the $0.50 increase in the price of their espresso drinks." That is a reasonable simplification for a textbook exercise, but a real shop has to ask whether the other variables really stay still. Customer numbers, the weather, a nearby promotion or a new competitor can all move sales in the same month as your rise. If you know of any of these, adjust your lower estimate to reflect them.

Be specific about the item as well. A rise on one size of a drink, or on one product in a range, changes only the sales of that line. If the item you are changing is part of a bundle or a set, count the bundle sales too, because a higher price on one part can change how often the whole set sells.

Also consider timing. If the item sells mostly at one time of day or one time of year, your estimate should reflect that. A rise made in a quiet season is a different decision from the same rise made at the start of a busy one, even when the arithmetic is identical.

Finally, check that your estimates are for the same item and the same period as your price change. An estimate built from last year's peak month may overstate your extra margin, and a figure built from a quiet week may understate it. Neither is wrong as a starting point, but both need a note saying where the number came from.

4. Work out the extra margin

The third figure combines the first two. Multiply the price change for each unit by the number of units you expect to sell. The result is the extra margin the rise should produce, provided your sales hold up and other costs stay unchanged. The OpenStax example works this way: a $0.50 increase for each espresso drink on an estimated 1,500 units gives an increase in overall contribution margin of $750.

The textbook also says that net operating income will rise by the same $750. That statement rests on the same assumption as before, that the price is the only change. In your own shop, the extra margin is a forecast, not a bank balance, until real sales confirm it.

Contribution margin needs one plain explanation. It counts what each sale adds after the costs that rise with each sale, and it is the amount that goes toward covering your fixed costs such as rent and wages. A positive figure for the rise does not mean the shop is profitable overall. It only means this one change adds money on paper.

Now run the calculation again with your lower estimate. The extra margin from the rise becomes smaller. Lost sales also remove margin earned at the old price; that separate loss is not included in price change multiplied by units sold. Subtract that lost margin to assess whether the rise pays off overall.

A useful habit is to write down how many units you could lose before the rise adds nothing overall. You can work that out from the margin you earn on each unit at the old price. Treat the result as a rough guide rather than an exact target, because your costs and your customers will not hold still.

Keep the arithmetic simple. Write the price change, the units and the result on the same line of your note. Each figure should be visible when you come back to check it, so you can see at a glance which number moved if the real result differs.

If a figure in your note cannot be explained in one sentence, go back to where it came from before you rely on it.

Illustrative example: calculate the increase

An illustrative $1 rise on 20 units gives $20 in extra margin if unit costs and sales stay unchanged: $1 multiplied by 20 equals $20. This calculation isolates the price increase. If fewer units sell, assess the margin lost on those sales separately before deciding whether to keep the higher price.

5. Enter the new price in the till and check it

Now make the change. Update every price record you listed in step one, not just the one you see first. If your system has an effective date field, set it to the day the new price should begin, and record that date next to your three figures. If your system can save a change as a draft or schedule it for later, use that option so the new price does not go live before your shelf labels and menus are ready.

Then check the price in three places. First, compare the price on the till screen with the shelf label or menu board. Second, ring up one test sale if your till supports one, or check the screen price before the first real sale of the day. Third, look at the sales slip, because that is the price the customer sees and the one you will rely on when you count sales later. A price can be correct in one record and wrong in another, so check each place the item appears, including any second till and any online listing you run.

One correct sale is not enough proof that the change has taken effect everywhere. Look at a few more sales across the day, especially for items sold at more than one counter. If one counter still shows the old price, go back to your list from step one and find the record that was missed.

Tell the staff at each counter about the change before it goes live, and tell them the exact new price to quote. A short note on the till or at the counter is enough. This helps avoid sales at the old price while a counter catches up, and it lets staff answer a customer's question without guessing.

Finally, update your note. Record the date the new price went live, the name of each record you changed, and whether each check passed. If something did not pass, write down what you did about it. This note is the record you will compare against when you review the change.

6. Compare real sales with your estimate

Choose a period to review the change, such as a few weeks, long enough to cover the normal ups and downs of your trade. A single busy weekend can make a rise look better than it is, and a slow week can make it look worse. At the end of the period, pull the units sold at the new price and compare them with your two estimates from step three.

Note any other changes in the same period, such as a new product, a closed road or a seasonal event, so you can judge the result fairly.

Then work out the actual extra margin. Multiply the price change for each unit by the units you actually sold at the new price, and compare the result with the figure from step four. If actual units are close to your first estimate and the extra margin matches, the rise is working as planned. If units fall toward your lower estimate, look again before you raise the price any further.

If the extra margin is smaller than you expected while units look fine, check the price records again. A mismatch between two records can hide a rise in the numbers, because one counter is charging one price and another counter is charging the old one. Go back to your list and confirm that each record holds the same new price.

If units rose more than you expected, do not assume the rise was a success on its own. Check whether a promotion, a new group of customers or a change in your opening hours explains the difference before you plan the next rise.

Last, write down what you decided. Keep the price, adjust it, or reverse it, and say why in one line. Keep the three figures with that decision so the next rise starts from the same method. Over time, a short set of notes like this will tell you more about your customers than a single price change ever could.

Start with one item today

Choose one item, note its current price and proposed increase, and pull its recent unit sales before changing the till. For another view of sales and costs, read about checking average ticket against costs.

Related guides: Avoid 5 resale certificate errors on shop supplies · Check 7 items before charging sales tax in your shop.

Questions

What are the three figures to check?

Check the price change for each unit, expected units sold and the extra margin they produce together.

Does extra margin mean the shop is profitable?

No, the increase from one price change does not establish overall profitability. Lost sales and other costs still affect the result.