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Big VS. Small Company Pricing
BROAD Assumptions ... small company sells $300,000 a year, owner makes let's say $75,000 net for himself. Assume that each $100,000 in sales throws off $25,000 toward his $75 grand making each $100,000 increment in sales "important". Big company comes along bids only a $10,000 net of one of his $100,000 contracts ... coming in $15,000 below the smaller company. It gets worse. Big company coming into a new market needs $500,000 in sales to carry and justify a branch location. In the beginning they are not looking for profit ... just dollars to carry the branch the first year so they bid the small company's $300,000 at $75,000 less than the small company did.
Question ... if the small company does $300,000 in sales, throws off $75,000 net for the owner ... on the very next incremental $100,000 in sales should the owner bid as if to create another $25,000 profit for himself from that job as well?
Phil
